Households, poor ultimate victim of high fuel prices

LAHORE - The oil prices at international level had been significantly dropped from 147 US dollar to almost 88 US dollar but Pakistan Government did not pass on this relief to its masses fully. Only an eye-wash relief of Rs 5 on petrol was allowed. On the contrary, government has increased the prices of diesel and kerosene oil by Rs 3.50 and Rs 3.00 respectively. This increase in petroleum prices had badly impact on household items and the poor.

The increase in diesel and kerosene oil is really a strange action on the part of government because when the international prices of crude petroleum were falling down why the prices of diesel and kerosene oils had been increased in Pakistan. The question is whether the government is unaware of the fact that diesel is the fuel that is being used in commercial transportation of all kinds in the urban areas and for generating electricity for tubewells for irrigating fields in rural areas. A rough estimate indicates that petrol consumption in the country is around one billion litres per month while diesel consumption is around nine billion litres per month.

This estimate further revealed that government’s so-called relief to masses in petrol, in fact, has become a blessing in disguise, which was further generating huge revenue of more than rupees 28 billion per month for government.

While on the other hand, this increase in diesel and kerosene oil prices had further increase the cost of daily use items in the country. What happened ultimately is that the fall in international oil prices gave relief to the people of the world except Pakistan where its fructification were inversely proportional.

In order to make a detailed analysis of the impacts on households, three different effects are needed to be kept in mind:

(i) The impact of a lowering in the level of GDP and the rate of growth on different groups within the income distribution;

(ii) The direct effect of oil and oil products price increases on the cost of living of the different groups;