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Government Set to Reduce Fuel Prices Amid International Oil Price Slump

ISLAMABAD: Following the presentation of a tax-heavy budget in the National Assembly, the government is poised to leverage the decline in international oil prices by reducing domestic fuel prices. Effective June 16, petrol prices are expected to drop by Rs9.28 to Rs259.08 per litre from the current Rs268.36 per litre. Similarly, high-speed diesel (HSD) prices are anticipated to decrease by Rs4.02 per litre to Rs266.20 from Rs270.22 per litre. This marks the fourth consecutive reduction in petroleum prices since May 1.

The global oil market is experiencing a downward trend, influenced by the resolution of the Israel-Iran conflict and a reduction in attacks by Houthis on Red Sea shipping lanes. These geopolitical developments have contributed to a significant decrease in oil prices, with diesel prices in the international market falling to $90 per barrel, while petrol prices have decreased to $84 per barrel. Despite this, the premium on petrol remains at $9.590 per barrel and $6.50 per barrel on high-speed diesel.

The upcoming holiday season in Europe, spanning from mid-June to the end of July, typically sees an increase in vehicular travel, potentially driving up the demand and prices of petroleum products. However, the current drop in international prices allows the government to offer immediate relief domestically. The reduction in fuel prices is not only a response to the international market but also a strategic move to ease the financial burden on the public, especially after the announcement of a budget laden with taxes.

Based on data up to June 13, 2024, and with two days remaining in the current fortnight, the government is likely to reduce kerosene prices by Rs2 per litre, setting the new price at Rs169.61 per litre. Light Diesel Oil (LDO) may see a reduction of Rs4.07 per litre, bringing it to Rs153.25 per litre. These reductions in prices are significant as they impact the cost of living and transportation expenses for the general public and various industries.

These anticipated prices are calculated considering existing government taxes and excluding any adjustments for dollar exchange rates. The Internal Freight Equalization Margin (IFEM) currently stands at Rs7.83 per litre for petrol and Rs3.73 per litre for HSD. The ex-refinery price of petrol is expected to be adjusted downward to Rs175.07 per litre from Rs184.02 per litre, and diesel to Rs185.69 from Rs189.71 per litre. These adjustments reflect the government’s efforts to maintain a balance between international price trends and domestic economic stability.

The reduction in petroleum prices is part of the government’s broader strategy to manage the economic challenges posed by fluctuating oil prices and to provide relief to consumers. The Ministry of Finance and the Oil and Gas Regulatory Authority (OGRA) have been closely monitoring the international market trends and have ensured that the benefits of lower global prices are passed on to the consumers in a timely manner.

Industry experts believe that while the current reduction in prices is a positive step, the government needs to adopt a long-term strategy to mitigate the impact of volatile international oil prices on the domestic market. This could include measures such as diversifying energy sources, increasing the efficiency of energy use, and building strategic oil reserves.

The government’s proactive approach in adjusting fuel prices in line with international trends is likely to be welcomed by both consumers and businesses. Lower fuel prices can help reduce transportation costs, which in turn can lower the cost of goods and services, providing a much-needed boost to the economy.

In conclusion, the reduction in petrol and diesel prices from June 16 is a timely relief for consumers and reflects the government’s commitment to aligning domestic prices with global market trends. As the international oil market continues to fluctuate, the government’s responsiveness in adjusting prices will be crucial in maintaining economic stability and public satisfaction.

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