Petroleum price hike a death blow, says Pakistani daily

November 2nd, 2010 - 2:33 pm ICT by IANS  

Islamabad, Nov 2 (IANS) The steep hike in prices of petroleum products will be “a death blow to most middle-income people”, a Pakistani daily said in an editorial.

The editorial Tuesday in the Express Tribune said: “In raising petroleum prices by just under Rs.6 per litre, the government has delivered what many will see as a death blow to most middle-income people of this country.”

The government has said the rise in prices has taken place due to increase in prices in the international market.

“However, that logic will provide little solace to ordinary Pakistanis who will see the substantial price jump further erode their purchasing power, by increasing the size of their monthly expenditure on fuel”.

It noted that the “increase in the price of fuel will add to inflationary pressures in the economy, significantly pushing up the cost of production since petroleum products are used as fuel in factories”.

“A hike in the price of petrol, and in particular diesel, by increasing transport costs pushes up prices of commodities across the board, especially at the retail level. Furthermore, pressure builds up on owners of public transport vehicles to raise fares, and this too disproportionately hurts low and middle-income people.”

While observing that the hike may make sense from the point of view of economics, the editorial noted that it does not explain “why the government has often been so reluctant to pass the benefit of falling oil prices to local consumers in the form of reduced prices. That has rarely happened and even when it has, the reduction has been nominal”.

It went on to say that those who understand the pricing logic know that “this is done in large part because the government ends up with several billion rupees every year through the petroleum development levy”.

“This means that when the price of oil falls internationally and local prices are not reduced, or are reduced only nominally, the government stands to make a windfall - at the expense of consumers.”

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