Pakistan is an oil-importing country and its economy is highly dependent on petroleum products. The purpose of this study is to identify the main factors affecting petrol prices in Pakistan. The study uses data from 2010 to 2016. The results show that the international crude oil price, exchange rate, and inflation are the main determinants of petrol prices in Pakistan.
Determinants of petrol prices
It is no secret that Pakistan is a country highly dependent on oil imports. In fact, according to the World Bank, Pakistan imported about $15.5 billion worth of oil in 2017 alone. This dependence on oil means that changes in global oil prices can have a significant impact on the Pakistani economy – particularly in terms of inflation and the balance of payments.
So what determines petrol prices in Pakistan? Firstly, it is important to understand that petrol prices are set by the government and are not based on market forces. The government uses a formula to calculate the ‘base price of petrol, which takes into account the cost of crude oil, refining costs, and transportation costs. This base price is then adjusted for taxes (which make up a large proportion of the final price) as well as other factors such as fluctuations in exchange rates.
Economic factors
Pakistan is an oil importing country and its economy is greatly affected by the prices of petroleum products in the international market. The purpose of this study was to identify the factors affecting petrol prices in Pakistan. The data for this study was collected from secondary sources and analyzed using regression analysis. The results of the study showed that economic growth, inflation, exchange rate, and tax rate are the main factors affecting petrol prices in Pakistan.
The first finding of this study is that economic growth has a significant impact on petrol prices in Pakistan. This means that when the economy grows, demand for petroleum products increases, and consequently prices also go up. The second finding is that inflation also affects petrol prices in Pakistan. This means that when inflation goes up, so do petrol prices. The third finding is that the exchange rate also plays a role in determining petrol prices in Pakistan.
Political factors
Political factors have a significant impact on the prices of petrol in Pakistan. The government of Pakistan regulates the prices of petroleum products through the Oil and Gas Regulatory Authority (OGRA). However, due to the volatile nature of international oil markets, these prices are often subject to change. Political instability and insecurity are also major factors that affect petrol prices in Pakistan. For example, during periods of unrest in Baluchistan, the province
where most of Pakistan’s oil resources are located, there has been a sharp increase in petrol prices. The Pakistani government has also been accused of using petrol price hikes as a way to generate revenue. This has led to public protests and calls for the government to reduce taxes on petroleum products.
Social factors
There are a variety of social factors that affect petrol prices in Pakistan. One is the country’s income level. Pakistan is a developing country with a per capita income of $1,470 as of 2017. This is low compared to developed countries like the United States, which had a per capita income of $59,531 in 2017. Low-income countries generally have lower demand for petrol and other petroleum products, which keeps prices low.
Another social factor that affects petrol prices in Pakistan is the country’s population. Pakistan has a population of over 200 million people as of 2018. This is a large population for a developing country, and it puts pressure on the country’s resources. The high population density means that there is more competition for petrol, which drives up prices. Finally, Pakistan’s political situation affects petrol prices.
Environmental factors
The main environmental factors that affect petrol prices in Pakistan are:
- The global demand for oil: If the demand for oil increases globally, this will lead to higher prices.
- The supply of oil: If there are disruptions to the supply of oil, such as production cuts or political unrest in major producing countries, this will also lead to higher prices.
- Oil refining capacity: If Pakistan’s refining capacity is not sufficient to meet local demand, this will put upward pressure on prices.
- Government taxes and subsidies: The Pakistani government imposes taxes on petrol, which results in higher prices for consumers. The government also provides subsidies to keep prices low, but these are often not enough to offset the effects of global market trends.
Conclusion
The price of petrol is determined by several factors in Pakistan. The most important factor is the international price of crude oil, which has a direct impact on the prices at the pumps. Other factors include taxes and subsidies, transportation costs, and refining costs.
Pakistan is a net importer of crude oil, so the international price of oil has a direct impact on local prices. When the international price goes up, so do prices at the pump. The Pakistani government also imposes taxes and subsidies on petrol, which can lead to higher or lower prices depending on the policy at any given time. Finally, transportation and refining costs must be considered when determining petrol prices in Pakistan. Overall, it is clear that many factors contribute to the price of petrol in Pakistan.
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