Impacts of Petrol Price Hikes

 

Petrol prices are updated twice a month in Pakistan and per liter price is same across the country.

Much of the inflation in the country is due to rapid increase in the petrol prices in recent months.

The fluctuation in petrol prices is determined by various factors.

When the per barrel price of petrol increases in the international market, due to whatever reasons, the cost of petrol increases in Pakistan as well.

Similarly, when the Pakistani rupee depreciates as compared to dollar, petrol price increases because petrol is dealt in dollars.

In the same way, the price of petrol in Pakistan is a mixture of components and the major component is petroleum levy, an indirect tax to raise extra revenue.

In the recent past, the government had to remove the subsidy on petrol and increase the petroleum levy due to IMF conditionality.

That said, the increase is petrol prices results in huge inflation in general.

Obviously, the first impact is direct which is increased petrol price for vehicles.

The second impact is increase in fare prices for public transport.

Third is the increase in prices of goods and services as the per unit cost of every good increases, which they have to transfer to consumers for their profit margin to remain intact.

Fourth, the cost of energy also increases.

All these impacts can be seen in Pakistan in real time. In fact, the entire economic system is impacted due to petrol price. And Pakistan cannot do much because we are dependent on imported petrol so much.