Petrol, Diesel Prices Rise Slightly; LPG Becomes Cheaper

ISLAMABAD: The government announced new prices for petroleum products on Tuesday, with a marginal increase in the prices of petrol and high-speed diesel (HSD). Meanwhile, the price of liquefied petroleum gas (LPG) saw a notable reduction, offering some relief to consumers. The new rates, effective immediately, will remain in place for the fortnight ending January 15.

Petrol and Diesel Prices: A Mixed Bag for Consumers

The ex-depot price of petrol has been revised to Rs255.66 per litre, reflecting an increase of Rs3.56 from the previous fortnight. Petrol is widely used in private transport, including motorcycles, small cars, and rickshaws. This hike is expected to directly impact the budgets of middle- and lower-middle-class households, who are already grappling with inflation.

High-Speed Diesel (HSD), essential for heavy transportation and agricultural machinery, saw an increase of Rs2.96 per litre, bringing the new price to Rs258.34. HSD is critical for sectors like transport, agriculture, and construction, and its price is closely linked to inflation, especially for food items and other essentials.

LPG Prices Drop, Offering Some Relief

In contrast, the Oil and Gas Regulatory Authority (Ogra) announced a reduction in LPG prices for January. The price per kilogram decreased by Rs4.01, or 1.58%, offering a slight reprieve to households and businesses relying on LPG for cooking and heating.

An 11.8kg LPG cylinder, commonly used in homes and small businesses, is now priced at Rs2,953.36, down from Rs3,000.79 in December. Ogra attributed the decrease to a drop in Saudi Aramco's Contract Price (CP) and a minor fluctuation in the dollar exchange rate.

Taxation and Price Composition

The government charges about Rs76 per litre in taxes on both petrol and HSD, including:

• Petroleum Development Levy: Rs60 per litre
• Customs Duty: Rs16 per litre

Despite a zero General Sales Tax (GST) on petroleum products, oil companies and dealers earn around Rs17 per litre in distribution and sales margins.

For LPG, the producer price is tied to Saudi Aramco’s CP and the exchange rate. While Aramco’s CP dropped by 2% this month, a slight increase of 0.12% in the dollar rate kept the reduction modest.

Economic Impact of Fuel Prices

The hike in petrol and diesel prices is expected to have a ripple effect on inflation, particularly in the transport and agricultural sectors. Increased HSD costs will likely raise the prices of food, vegetables, and other essentials, as it is heavily used in freight and farming equipment.

Conversely, the reduction in LPG prices may provide some relief to urban and rural households, especially those relying on gas cylinders for heating and cooking during winter.

Conclusion

The adjustment in fuel prices reflects the government's efforts to align with international market fluctuations while maintaining a balance between revenue generation and consumer relief. However, the marginal relief in LPG prices may not fully offset the broader inflationary pressures caused by increased petrol and diesel rates.