Petrol could hit Rs 1,000 a litre if supply breaks, petroleum minister warns

Petroleum Minister Ali Pervaiz Malik said on Sunday that petrol could reach Rs 1,000 a litre in Pakistan if supply were to break down, while insisting there is no shortage at present.

His two numbers are the ones to hold on to. International oil prices have risen about 80pc, he said, and Pakistan has passed roughly half of that through to the pump. Petrol is Rs 389.14 a litre today and diesel Rs 424.04.

What Rs 1,000 a litre would actually mean

At today's Rs 389.14, filling a 40 litre tank costs Rs 15,566. At Rs 1,000 it would cost Rs 40,000. A rider doing 20 litres a month would go from Rs 7,783 to Rs 20,000.

That is the warning, not a forecast. The minister's point was that the gap between the world price and the Pakistani pump price is being held open by the exchequer, and that it closes fast if cargoes stop arriving. Run your own figures on the fuel cost calculator and watch the daily number on the petrol price page.

The supply picture

The pressure is coming from shipping. Tanker traffic through the Strait of Hormuz has been disrupted since the summer, freight and insurance costs on Gulf cargoes have jumped, and that is why diesel has kept climbing while petrol has drifted. Oil marketing companies said on Friday that Rs 66.7 billion of their money is stuck in price differential claims and that petrol stocks are down to about 18 days.

Malik said tokens worth Rs 180 million were redeemed under the fuel relief scheme on Friday alone, a measure of how much of the retail market is now running on the subsidy.

Gas this winter

On gas, the minister said the government would import whatever is needed to avoid a winter shortage, "even if it has to spend $100 million instead of $3 million". That is a large jump in a single line and it will land on the gas tariff or the budget eventually. Our Sui gas bill calculator shows what the current slabs cost per month.

Drilling

Malik said work has started on new oil wells and that discoveries are expected within October. Pakistan currently meets a small share of its own oil demand, so a domestic find changes the import bill only slowly, if at all, in the first year.

The politics

The minister also said no one would be allowed to march on Islamabad, and urged against politicising people's difficulties. Jamaat-i-Islami started a long march from Karachi on Sunday demanding the petroleum levy of more than Rs 100 a litre be abolished, and PTI has called its own march for 27 September.

What to watch this week

The next OGRA price review falls at the end of the month. Two things decide it: the Brent price and the rupee, which is at Rs 277.25 to the dollar. Neither has moved much in the last week.