Marketing of Oil Following a record-breaking drop in the value of the Pakistani Rupee (PKR) against the US dollar last week, businesses and consumers are anticipating yet another significant increase in the pump price of Motor Spirit (MS) and High-Speed Diesel (HSD) this week.
Black market exchange rates for the PKR have fallen from 307/USD on August 18 to 320/USD today, raising more doubts about whether petrol and diesel prices at the pump will surpass 300 this Friday.
The rupee has had a nightmare few weeks since the International Monetary Fund in July approved a new $3 billion bailout package for Pakistan. It hit 304/dollar in the interbank market at 9:45 AM today.
Relevantly, between August 1 and August 15, total trades for Brent and WTI ranged from $81 to 87. Now that both grades have fallen into the $78–85 range, it makes sense for the government to raise fuel prices in light of the PKR decline from last week.
It would be a big mistake to blame it on global commodity prices rather than the IMF’s premium cap on PKR/USD trade. According to recent reports, Kakar’s team may choose to covertly subsidise energy products in order to quell public opposition to needless counter-inflationary measures. By doing this, it won’t lower or raise fuel prices but will instead direct the negative effects through other industries, an analyst responded in an email.
According to the current situation and anticipated outcomes, he continued, the landing cost of both MS and HSD will experience yet another significant increase as long as the PKR keeps declining.
The price of petroleum products increases right away when the dollar increases. Therefore, if the dollar appreciates on the foreign exchange market, it suggests that the federal government will choose to raise petrol prices rather than maintain them within a price regime, regardless of the consequences.
Furthermore, the effects of these price increases—both recent and impending—could have a significant impact on the inflation trend in August. When the central bank meets to review its monetary policy on September 14, it may be forced to raise its key policy rate if inflation is higher than anticipated.
Despite analyst predictions of a brief recovery up to highs of 250–270, the local currency started moving south after disbursal, contrary to expectations. As a result, the situation has drastically changed, with the rupee now expected to trade in the 300–320/USD range for the rest of 2023.
Although the PKR/USD trend has alarmed economic managers and stakeholders in the nation, the downturn has had a devastating effect on the oil and gas sector in particular.
Under the condition of anonymity, a dealer with more than a dozen pumping stations across Punjab told ProPakistani on Monday that the pump price of gasoline is unlikely to stay at 293/liter with the exchange rate at 303-305/$, especially if the current exchange rate persisted.
