Petrol is a necessity for the entire world nowadays. Almost every vehicle is run on it and the number of vehicles are also increasing day by day here in Pakistan, despite high prices due to taxes on vehicles - that we normally use and are imported - the number of buyers are increasing day by day. We have seen sudden surges in the petrol prices in Pakistan and overall the world.
The petrol prices as of today is around 159. 86 per liter. In the last month of February, the Government of Pakistan increased petrol prices due to the hike and increase in petroleum products all around the world. This is the record highest petrol price in the history of Pakistan.Now, according to the finance division of Pakistan the government has levied sales tax to absolutely zero percent and tried to reduce the rates as much as they could. However, somehow you will see people blaming the government for increasing the prices of petrol and looting people by applying taxes that are now unbearable for people.But, Have you ever thought about the whole science behind petrol price surges and why the prices increase or decrease over the period of time? Is it legitimately and solely governments’ fault for increasing the prices that are now not affordable and also increasing and affecting the prices of almost everything in the country?
There are a number of factors that affect and play an important role in the hike in the prices of petrol all over the country. These factors also affect the decline of the prices over time but that is less likely the case if we see today’s situation in Pakistan as well as around the globe. So, let’s take a look at it and see what actually happens that pushes those numbers higher and higher with passage of time.
The very first and foremost factor is simply demand and supply. The prices increase and decrease due to this factor for 80 percent of the time.To understand this factor, you need to simply understand that if the production of oil is more than the consumption the price will decrease. On the other hand, if the production is not according to the demand the prices will hike up and they will increase to balance out the distribution of the product until or unless they somehow manage to produce more fuel and be able to fulfill the demand.Now, this demand and supply usually matters for most things but in fuel and gas price hikes it is the golden rule and the whole world acts according to this one.
The next factor that affects the hike of petrol prices in Pakistan is the value or worth of money against the dollar. The price of petrol and gas is based on the standard of the dollar against your country’s money. If your money’s strength is not up-to-the-par you will see a hike in petrol prices. When it starts to get stable, the prices will automatically start to decrease.
There is a cycle of petrol prices where the price of fuel will decrease by a few rupees and after some time there will be a surge with even more price. This circle goes on and it slowly but definitely increases the prices over years. For example, the government will decrease the price by 2 rupees when its price is 70 rupees. After 15 days or - at the maximum - a month the prices will rise with 5 rupees and the 68 rupees will go to 73 rupees. In worst case scenarios it can go even higher.This circle usually goes on and on and the prices can be increased or decreased according to the supply and demand factor as well as your economy’s worth against dollars over the period of time.
Now, after supply and demand, economic situation, and cycle, comes next is the taxation part. The government of Pakistan lavy tax on petrol, gas, and diesel prices. This tax is for the budget of the economy that is decided by the government according to the policies, rules and regulation decided by the yearly budget. This tax helps to build and stabilize the economy and once the economy is better in the face of dollar the price of petrol automatically decreases.The unrefined oil is imported in the countries that don't produce oil and then it goes to refinery factories. Once the oil is refined and ready to be distributed that’s the actual price it costs for a country. Then comes tax by traders and the government to impose new prices that can be increased and decreased according to the situation.
Due to the ongoing Russia-Ukraine crisis, it is highly likely that prices of fuel might be increased and this hike is not only in Pakistan but all around the world. When fuel prices go up, all brands and services increase prices accordingly due to the consumption of fuel and its usage in their business in one or another and that is the reason why surge of petrol prices always cause the increase in inflation across the country. The prices across the globe affect Pakistan and then eventually people gets affected by it.
As we stated earlier as well. The Government of Pakistan has levied zero percent tax on current prices to give a bit of relief to the people, we hope this situation is sorted out very soon. The fuel price cycle will be done in a few days now and the decision to increase or decrease the prices of fuel will be decided in the light of these factors.