The government has announced a significant reduction in the price of diesel after negotiations with local oil refineries. According to Federal Minister for Petroleum Ali Pervaiz Malik, the reduction could be between Rs 30 and Rs 32 per liter. However, the final rates will be released after OGRA’s calculations.
The government has taken this decision amid rising prices of petroleum products in the global market. The ongoing tension in the Middle East has increased pressure on global oil supply and refined product prices. Brent crude oil reached $91.89 per barrel on Wednesday.
Ali Pervaiz Malik said that two to three virtual meetings were held with refineries on the instructions of Prime Minister Shahbaz Sharif. The government requested them to provide relief in the price of locally produced diesel. The refineries agreed to this demand after negotiations.
According to the minister, OGRA will now determine the new price based on the available data. Therefore, the reduction of Rs 32 should be considered as an expected reduction for now. The final consumer price will come out after the regulatory calculation.
The importance of the reduction in diesel price at this time is also greater because the use of high-speed diesel is not limited to vehicles. Agricultural machinery, tube wells, freight trucks and public transport also depend on it.
A reduction in price of more than Rs 30 can reduce the operating costs of transport. This is also likely to have an impact on the delivery of agricultural produce and essential goods. However, consumers will get the full benefit only when different sectors of the supply chain pass on their cost reduction.
Diesel prices in Pakistan have been continuously affected by global market fluctuations in recent months. High-speed diesel was priced at Rs 383.95 per liter in the rate implemented from August 14. Later, the price reached Rs 390.42 from August 19.
In this context, a possible reduction of Rs 32 could bring diesel to around Rs 358 to Rs 360 per liter. This is just an estimate. The final price will be clear only after the notification of OGRA.
The government says that fiscal measures have already been taken to limit the effects of the global crisis. The recent fluctuations in the prices of petroleum products have made it difficult for the government to balance public relief and fiscal discipline.
The situation for diesel in the global market has also not returned to normal. According to Reuters, supply disruptions from the Middle East and Russia have put the global diesel market under severe pressure. Refineries in the US and India are playing an important role in meeting global demand in this situation.
The role of local refineries for Pakistan has become even more important in this situation. The government has also indicated that it will move forward with a plan to upgrade the refinery sector and improve its efficiency.
Another goal of the government is to improve oil storage. It has also been announced to start work on activating bonded oil storage schemes in border areas. This could provide some protection to the local market in case of future disruptions in global supply.
Overall, a possible Rs 32 reduction in diesel prices could be a significant immediate relief for farmers, transporters and industrial consumers. However, the long-term impact of this move will depend on global oil prices, refinery margins and local supply condition
