Gasoline prices feared to increase 15pc on rupee depreciation

LAHORE: Petrol prices are feared to increase by up to 15 percent after the latest rupee freefall that could unleash inflationary pressures on almost all the goods and services, traders and industry officials said on Tuesday.

“Prices of petroleum products would go up and up from November 1,” a senior official of Pakistan State Oil (PSO) said, requesting anonymity.

“With string of devaluation plus impact of Brent increase, high prices of petroleum products are around the corner.”

Since the country is ‘predominantly’ oil-import dependent to meet liquid fuel needs, “there will be significant increase in the fuel prices,” the official reiterated.

The official is expecting a liter price of petroleum products to balloon by about 12-15 percent from the present level, with dollar hovering around Rs135.

Rupee lost around eight percent of its value against the US dollar in the interbank market to close at 133.64 on Tuesday.

An estimate showed that price of super petrol, which is currently hovering at Rs93/litre, could be increased by Rs11 to Rs14/litre with the start of next month. People should be ready for new prices ranging between Rs104 to Rs107/litre if the government passes through the impact. Similarly, diesel price, which presently stands at Rs106.60, could jump by Rs13.

Massive devaluation of rupee against dollar brought the dollar up to Rs136 in open market on Tuesday’s morning. Such a drastic devaluation is going to heavily impact the import bill.

Imports of petroleum products soared 32.1 percent to $14.43 billion in the last fiscal year of 2017/18. The oil import bill is almost a quarter of the country’s annual imports of $61 billion.

Rising oil prices are prompting forecasts of a return to $100 a barrel for the first time since 2014, creating both winners and losers in the world economy.

Upward trend in oil prices has sparked fear of ‘returning to $100 a barrel scenario’ for the first time since 2014. The oil-importing nations are going to brave the high cost of petroleum products that would fan inflation and dampen demand as well as growth.

Almas Hyder, president of Lahore Chamber of Commerce and Industry said $100 a barrel price by end of the current year is not “a good development for the national economy”. It will inflict inflation to all oil buying countries of the world.

“I don’t think that’s going to happen even after some unwelcoming developments in the region, especially squeezing oil supplies from Iran following imposition of sanctions,” he hastened to add. “I also think if the world goes into recession because of China-USA tiff over tariff disagreement, the oil price might drop.”

The PSO official said crude oil price hitting $100 a barrel by end of year is a possibility, given the fact that the Organization of the Petroleum Exporting Countries and Russia declined to increase output after sanctions on Iran.

“The rising crude price is a matter of concern, posing major challenge,” the official added. “The geopolitical situation in the region will very much determine possible oil market moves.”

Shahid Sattar, a leading energy expert said any increase in price of petroleum products would bring bad news for the industry.

“We have no control over international oil prices and hence are left with no option but to face the music,” Sattar said.

The expert said the present government has promised to take steps for making local industry viable amid cut-throat competition in the region. The impact of oil prices would be same for all the oil consuming countries.

“We can provide some solace to industry with lowering of electricity tariff, for which, government has assured the industry.” Sattar added.