ISLAMABAD: This unequal response to the rise in price of petrol and HSD implies that the sectors of the economy will be affected in a differential manner. Owners of motorcycles and cars who use petrol will gain from their minimal savings, whereas the logistics industry, which is highly dependent on diesel, will bear a bigger brunt of increased costs.

Petrol Price and HSD Price Hiked

The government reduced the petrol rate and increased HSD rate in different ways on Monday, reducing the petrol rate by Re1 per liter and increasing HSD rate by Rs3.37 per liter. The revised rates have been announced by the Ministry of Petroleum through an official notification, where the petrol rate is reduced to Rs334.18 per liter while the HSD rate will increase to Rs386.83 per liter.

Since there is an imbalance in the adjustments for the price of petrol and HSD prices, the effects will be felt differently by various sectors of the economy. Motorists and bikers who use petrol will only have a slight reduction in their costs, whereas the transport and logistics industry, which relies a lot on diesel, will have a bigger hike in its costs.

Before the Monday amendment, the government had maintained the rate of petrol as well as HSD at their previous levels on July 26 and 27 respectively. According to the Ministry of Petroleum, there were no changes in rates during this period because Platts, which is the standard used to determine international prices of fuels, had not published new rates over the weekend.

The most recent change in the price of petrol and HSD has been done through a daily pricing formula for fuel introduced by the government on July 17. The decision was made in the wake of sudden changes in the international oil market because of fresh strife in the Middle East region. Through this decision, the government has decided to determine the prices of fuel on the basis of the average rate of the last seven days in the international market.

In the context of the current rise in the price of petrol and HSD price in this week, there has been a dramatic increase in the global oil market. The price of Brent crude increased by 6% to US$100.50 per barrel on July 23, breaking through the US$100 level since the month of May. Tanker attacks in the Red Sea have made shipping in one of the most important routes in the world difficult.

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However, the increasing tension between the US and Iran has resulted in an increase in international oil prices over the past few days, but this is not where the impact ends. Leading technology stocks have weighed down US stock market indices in the same timeframe, and at the same time, European borrowing rates have been hitting their highest levels in years. This demonstrates that political uncertainties in the Middle East have continued to affect financial markets around the globe, including the domestic petrol price and HSD price in Pakistan.

In light of the new petrol pricing system that is currently revised on a daily basis through a seven-day averaging period, there is a possibility that we may soon witness yet another change in both the petrol price and HSD price, depending on the reaction of the international oil market due to the current situation in the Middle East.