Record hike in prices of oil products notified.

Byline: Khaleeq Kiani

ISLAMABAD -- In a sudden move, the government notified a record hike in the prices of petroleum products, including petrol and diesel, ranging from 27 per cent to 66pc depending on the product.

The hike is notified with immediate effect.

The step took many by surprise because it was out of schedule and was not prompted by any summary moved by the oil sector regulator, which is the normal procedure.

Most observers agreed that the step has been taken to address ongoing supply chain disruptions that have led to serious shortages in many parts of the country, in large part due to a pricing dispute between the government and the industry.

A senior government official told Dawn that the prices were increased four days ahead of the due date without waiting for a usual summary of the Oil and Gas Regulatory Authority (Ogra) 'to immediately pass on the impact of international price hike'. The revised prices will remain effective until July 31.

Effective immediately, increase ranges between 27pc and 66pc

He said the authorities feared that even a minor increase in sales in anticipation of a higher price would dry out petrol pumps across the country as the supply chain was already operating on very thin margins. He said the companies and retailers had already slowed down sales in some parts of the country 'for inventory gains' ahead of an anticipated price increase. In their calculus, the price increase would partially offset their past losses, he said.

But a senior source in the oil industry said it might not work out so neatly for the government. 'Illegal export of petrol to neighbouring countries will stop for the next week or two,' he told Dawn on condition his name not be used due to the sensitivity of the matter. 'Our price was currently cheaper than prevailing pump prices in Afghanistan and India, and some product was being smuggled to those countries as a result of this price difference.

He told Dawn that the industry saw an unusual spike in demand in Peshawar in the month of May, and especially June, and word within the industry was that this demand is coming from buyers who are transporting the oil to Afghanistan for sale. 'All that will stop due to the adjustment,' he said.

But the price hike may not subdue the hoarding behaviour the government has alleged is the root cause of the supply chain disruption seen across the country, according to him.

The decision to hike prices was announced by the ministry of finance after...