The fragile economic recovery currently taking shape in Pakistan is facing a renewed threat from the volatile global energy market. Economists and industry leaders have issued a stern warning this week, suggesting that a potential climb in international oil prices to 130 dollars per barrel could trigger a fresh wave of inflationary pressure. This concern stems from recent geopolitical hostilities involving the United States, Israel, and Iran, which caused crude prices to briefly exceed 110 dollars. Such disruptions raise significant fears regarding energy shipments through the Strait of Hormuz, a critical maritime corridor that facilitates roughly 20 percent of the world’s petroleum supply. While prices have shown some retreat from these peaks, the underlying volatility remains a major risk factor for an import-dependent nation like Pakistan.
The immediate impact of this global instability has already been felt at local fueling stations. Following the spike in international rates, the government recently increased consumer prices for petrol and diesel by approximately 20 percent. This adjustment aligns with recent data from the central bank, which indicated that headline inflation accelerated to 7 percent in February, up from 5.8 percent in January. Core inflation has reached even higher levels, hovering around 7.6 percent. Financial experts anticipate that inflation could persist above the 7 percent mark for the remainder of the fiscal year ending in June, as well as into the next fiscal period. Although improved agricultural output and food supply might offer some relief, the overwhelming pressure from energy costs continues to dominate the fiscal outlook.
Karachi-based advisory firm Tola Associates has modeled various scenarios to illustrate the potential domestic fallout. According to their projections, if global crude reaches 130 dollars per barrel, the price of petrol in Pakistan could surge toward 392 rupees per liter. Such a scenario would likely contribute an additional 7.11 percent to the overall inflation rate. Ashfaq Tola, the firm’s chairman and a former government tax adviser, noted that while an 88-dollar barrel results in an indicative price of 313 rupees per liter, the jump to 130 dollars would be catastrophic for the country’s economic stability. He expressed hope for market stabilization, pointing out that Brent crude has recently dipped back toward 83 dollars, yet he questioned the government’s decision to implement a 55-rupee price hike so abruptly given existing fuel reserves.
The energy crunch is not limited to liquid fuels; the liquefied petroleum gas sector is also witnessing significant price hikes. LPG, which is a staple for households and businesses without piped gas connections, has seen its retail price climb from 310 rupees to 350 rupees per kilogram since the conflict intensified. In certain areas, a 42-kilogram cylinder now costs 14,600 rupees, a jump of 400 rupees in a single week. Industry representatives, including Irfan Khokhar of the LPG Industries Association, have noted that while supplies remain adequate with several thousand tons of gas currently anchored at Port Qasim, panic buying and rising freight costs have allowed a gas mafia to exploit the situation by charging up to 450 rupees per kilogram.
The broader economic risk remains high as the country manages a massive energy import bill, which totaled 16 billion dollars last year. Energy experts emphasize that sustained prices above 110 dollars could force a recession in developed economies, which would further complicate Pakistan’s export and remittance channels. While some analysts believe the current situation is more manageable than the supply shocks following the Ukraine war—citing options like spot purchases and agreements with entities like the State Oil Company of Azerbaijan—the speed at which global tensions translate into domestic retail costs remains a primary concern for policymakers. As the country moves toward the Eid-ul-Fitr holidays, the arrival of additional LPG cargoes may stabilize supply, but the long-term price trajectory remains tethered to the shifting sands of Middle Eastern diplomacy.
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