Will Petrol Prices Increase in Pakistan? Strait of Hormuz Tensions Raise Oil Price Concerns

Growing tensions in the Strait of Hormuz have triggered fresh uncertainty in the global oil market, raising concerns that petrol prices in Pakistan could increase if international crude oil prices continue to climb.

Global oil prices have surged since the recent tensions between the United States and Iran started to rise. Crude prices have risen in mere days as concerns mount over a potential disruption in oil flow through one of the world’s busiest energy trade routes, the Strait of Hormuz.

As per market reports, U.S. crude oil has rallied to around $82 per barrel, while Brent crude oil is trading at nearly $84 per barrel. Just a few days ago, the two benchmarks were around $68 and $71 per barrel, respectively. If the upward trend remains, analysts warn that countries which are highly reliant on imported oil — like Pakistan — may have to pay more for their fuel imports.

Growing global oil price also has raised speculations regarding the price of petrol in Pakistan. While no official rise has announced, with international prices on the rise it could be another matter of weeks before the government adjusts local fuel prices.

Meanwhile, the government is reviewing a major change to the petroleum pricing mechanism. It discussed at the Petroleum Pricing Reforms Committee meeting headed by Federal Minister for Petroleum Ali Pervaiz Malik to move from a weekly price revision of fuels to a daily petroleum pricing system. The committee supposed to present its suggestions to PM Shehbaz Sharif before any final decision.

Economist Syed Wasif Naqvi feels daily variation in fuel prices may not be feasible in such situations. An average pricing formula based on various factors such as global oil prices, exchange rate, petroleum levy and other economic indicators more likely to continued by the government, he said.

The government has not yet said whether the daily pricing model will be in place or not. In the meantime, the Strait of Hormuz tensions have been affecting the oil market, and the players in Pakistan have been waiting for the next petrol price hike update.