Pakistan’s economy faces potential challenges if global oil prices reach $130 per barrel due to escalating tensions in the Middle East. Recent concerns arise as crude prices surpassed $110 per barrel following hostilities involving the United States, Israel, and Iran, raising fears of disruptions to oil shipments through the vital Strait of Hormuz. Analysts warn that sustained volatility could lead to increased fuel costs in Pakistan, a country heavily reliant on energy imports.
The recent 20% hike in petrol and diesel prices in Pakistan was attributed to rising global oil prices. The country’s central bank has cautioned that inflation may exceed 7% for the fiscal year ending in June. Karachi-based advisory firm Tola Associates projects that if global crude prices hit $130 per barrel, petrol prices in Pakistan could rise to Rs 392 per litre, potentially driving overall inflation up by 7.11%.
Pakistan’s significant dependence on imported energy exposes it to global price fluctuations. Data reveals that the country imported petroleum products worth $16 billion last year, constituting a substantial portion of its $58.4 billion import bill. The impact of higher global energy prices is already evident in retail markets, particularly in liquefied petroleum gas (LPG) prices, which have surged from around Rs 310 to Rs 350 per kilogram in Karachi amid escalating tensions.
Despite the price hikes, industry officials assure that LPG supply remains sufficient. Oil Companies Advisory Council representatives report the arrival of multiple LPG cargoes, each carrying over 20,000 tonnes, at Port Qasim, with more shipments expected before the Eid-ul-Fitr holiday. Economists emphasize that Pakistan’s reliance on imported fuel makes it susceptible to rapid domestic inflation pressures during geopolitical crises, affecting transportation and food costs.
