Oil price increase erodes common man purchasing power in Pakistan
Pakistan Times Business & Commerce Desk

KARACHI: The government has raised domestic petroleum prices in the range of 5.0% - 9.0% with effect from September 1, which were however generally anticipated given the massive spiraling on the international front, the move however has caused a widespread impact on the general prices eroding the purchase power of the common man.

It may be recalled that during the first eight months of this year (Jan – Aug 2005), the government has increased oil prices five times by a cumulative 25-27%. In the August 31, 2005 review, MoGas and HOBC prices were raised by 7.5% and 7.6% respectively, and prices of both Kerosene Oil and LDO marked 5.0% increase.

Further, HSD prices depicted 9.0% increment International prices of petroleum products showed an unprecedented increase during the last four fortnights (July-August) and New York crude futures had soared to almost the US$70/bbl level on concerns of severe global demand-supply imbalances due to the Hurricane Katrina, which eventually caused a major shut down of oil producers and refineries operations in the Gulf of Mexico.

However, prices have subsequently receded to around the US$67/bbl level. For FY2005-06, the government has budgeted Rs15.9bn Petroleum Development Levy (PDL).

This portrays a 47% increase compared to the Rs10.8bn revised estimate for FY05. This leaves limited margin for the government to significantly absorb global oil price increases. ●