International oil prices have have just hit their lowest level in a year
The government has reduced the price of petrol and diesel by Rs2 each, Finance Minister Asad Umar announced during a press conference on Friday.
The reduction in prices comes in the wake of a dip in international oil prices, which have just hit their lowest level in a year.
The government revises oil prices every month and any increase or decrease in the rate is mainly determined by changes in the price of international crude oil with a lag of one month. This means the price you have been paying in November were set according to international oil price of September.
According to the official rate — the one you pay at petrol pumps — a litre of petrol is currently selling for Rs97.83, including Rs6.15 petrol tax and Rs4.21 sales tax. However, international crude oil prices fell sharply in October and November as a barrel of oil traded below $50, its lowest level in a year, down from $76 per barrel of October 1.
The industry was expecting a cut of Rs8 in petrol and Rs2.5 in diesel prices but the finance minister explained that half of the oil shipments (of petrol) that arrived in the month of November were purchased before prices came down.
From December 1, you will pay Rs2 less on a litre of petrol and diesel. However, Umar said they are hoping to reduce them further for January because of the falling price trend in international market.
The cash-strapped government is going through its worst ever deficit in the history so it needs to increase its revenue, the minister said explaining the need for petroleum tax and sales tax.