Why are Oil Prices increasing in Pakistan?

Crude oil and natural gas are Pakistan’s two primary sources of energy. Both of these resources have witnessed a significant increase in demand from local industries, as well as an increase in prices over the past few months.

The cost of oil has risen from $60-65 per barrel to almost $80 per barrel. The rising cost of oil is adversely impacting the general economy, especially businesses that use it as raw material for their production process.

Millions of rupees are given as subsidies by Pakistan’s federal government to keep fuel costs stable and help the average person. However, there is still no clear policy in place in the nation for the distribution of fuel subsidies.

Due to the hike in Oil prices in Pakistan, people are facings lots of problems even though there are many people fighting or stealing Oil products.

In this article, we will discuss Why are Oil Prices increasing in Pakistan and what is the reaction of citizens to this event.

Supply and demand of crude oil in Pakistan

As per the Pakistan Import-export Data, Pakistan has a total of 114 Oil and Natural Gas Fields. Out of these fields, 82 have been discovered and 32 are yet to be discovered.

Out of the discovered fields, 22 have been fully developed and 70 have been partially developed. The majority of the oil fields are in Balochistan and Sindh.

while natural gas fields have been discovered in Punjab, Khyber Pakhtunkhwa, and Balochistan. Since Pakistan has a massive supply of crude oil and natural gas, the demand for these resources has always been less in the country.

However, as the country’s economy grows, so does its demand for energy. This growing demand for energy has led to significant pressure on the local oil and gas fields, which are expected to run dry within the next five years.

Oil price hike: A reaction to events in the Middle of the year?

In July, Petroleum oil prices had Increased from PKR 181.91 to PKR 233.36 in just one week and it impact the Pakistan market.

This sudden upward shift in oil prices was accompanied by a reaction in the stock market. After the sudden rise in oil prices, the stock market saw a steep fall of almost 1,000 points.

Experts predict that the stock market will remain unstable until the oil prices stabilize. The sudden rise in oil prices has sparked many discussions, but there are two leading theories as to why this increase occurred.

• First, there was a significant rise in demand for oil in the global market.
• Secondly, there was a disruption in the supply of oil in the Middle East. As demand for oil increased, there was a shortage of supply in the global market, which resulted in an increased price per barrel.

August 2022 Pakistan’s Latest Oil Price

Now examine the most recent Oils costs in Pakistan. You can see the current pricing for the most widely used petroleum products in the nation, including gasoline, diesel, light diesel, and kerosene oil, in the chart below.

Impact of increasing oil prices on businesses in Pakistan

The sudden rise in prices of oil Price, along with the recent increase in natural gas prices, will have a drastic effect on the overall cost of production in Pakistan. This, in turn, will have a negative impact on businesses that depend on oil and natural gas for their production process.

Businesses that use oil in their production process include refining, fertilizer, chemicals, power generation, and steel industries.

The rising cost of crude oil will result in higher production costs, which, in turn, will be reflected in the prices of the final product.

The cost of fertilizer production has increased by almost 25% since the beginning of July. Unless the government takes immediate steps to reduce the impact of rising prices, it may result in a rise in the prices of food commodities.

Increase in prices of natural gas in Pakistan

The natural gas prices in Pakistan have increased from $3.79 per million British Thermal Units (BTU) to $4.79 per million BTU.

This increase in natural gas prices is likely to have a significant impact on the overall economy of Pakistan. Natural gas is not only used as a raw material in industrial processing but it is also used domestically.

The rising cost of natural gas will have a negative impact on the general economy and will increase the domestic cost of living.

Domestic consumers of natural gas include fertilizer, power generation, and the textile industry. However, the average Pakistani household will also be affected by the recent increase in natural gas prices.

Conclusion – The sudden rise in oil prices has sparked many debates and discussions, but there are two leading theories as to why this increase occurred. Crude oil and natural gas prices will likely continue to rise in the near future as the demand for energy continues to grow and the country’s oil and gas fields continue to deplete. The government must take immediate steps to reduce the impact of rising prices. If the government fails to take these steps, the rise in the prices of energy will have a significant impact on the overall economy of Pakistan.