The latest fortnightly review has seen a decline of Rs 10 per litre in the price of petrol for Rs 214.80, as well as a decline in the price of all other fuel products, which should indicate to the Pakistani consumer that the worst of the price hike due to the Russian invasion of Ukrainse may well be over. However, the war itself is not showing any signs of being over as it approaches its first anniversary. The Ukrainian and Russian armies may not have settled down into trenches, but the apparent stasis on the battlefield bodes ill for the future. It is not just the war alone forcing up oil prices. A renewal of the covid-19 scare has brought China to curb demand, while it seems that winter has been relatively mild, with the result that demand for heating oil has not been so much as to drive up the price of oil. Domestically, the factor of Russian oil has not kicked in, and even before a representative from Russia has arrived in Pakistan, the Foreign Office is getting could feet, with Foreign Minister Bilawal Bhutto saying that Pakistan has not imported any discounted Russian oil.
With international oil prices likely to decline further, as the USA and its allies try to enforce the Rs $60 cap on Russian oil cargoes (and thus impose a cap on oil prices generally, the consumer will experience more relief. However, with the IMF package still stuck, the government will be sorely tempted to increase its sales tax receipts, which are presently zero, from oil. Apart from personal and vehicular transport, the decline in oil prices will mean the cheaper transport of goods.
The real test of the government will be to ensure that any recent price hikes because of fuel price increases are reversed quickly. The ‘invisible hand’ of the market cannot be left to do that automatically, because that will take time, and time is what the government does not have. At best, it has 10 months to the general election, and if PTI chief Imran Khan makes good on his dissolution threat, may have to go to the polls in over two-thirds of the country as early as March. It will work hard to explain the intricacies of the international oil market, but it will find him unwilling to listen.
