KARACHI, SEPT 19: The Oil Companies Advisory Committee (OCAC) finally increased the prices of all oil products by 20 to 34 paisa per litre on Thursday after keeping a freeze on price announcement for four days.

The ex-depot sale price of petrol was increased by 34 paisa to Rs34.66 per litre and high octane blending component (HOBC) too by 34 paisa to Rs39.13 per litre.

Kerosene will now carry new price of Rs18.61 per litre as compared to Rs18.41 per litre, showing a rise of 20 paisa per litre. Light diesel oil (LDO) price was increased by 28 paisa per litre to Rs16.93 per litre.

The OCAC, in a statement, said that there had been a steady increase in the international prices of both crude oil and finished products during the last few weeks.

In order to mitigate the impact on consumer prices during the current fortnight, the government has decided to reduce the petroleum development levy (PDL) on various products, the OCAC said.

Crude oil during the fortnight has increased by 8.2 per cent and currently Arabian Light Crude is at $26.89 a barrel.

The reasons for increase in global oil prices are: A) Possibility of war in Iraq as United States has increased its diplomatic efforts to win international support against Iraq, B) consequent to this war threat and the resultant uncertainty, the oil prices have spiked by a war premium of around $3-5 per barrel on crude oil, C) due to increase in crude oil prices major refining centres of Asia continue to reduce refinery runs to prop up weak refinery margins as a result of which product prices have increased and D) Opec members have kept the current output ceiling. According to some analysts, more crude oil is needed to meet the high world demand during winter month to prevent further run up in oil prices.

OCAC said that the above factors consequently had an adverse impact on the prices of petroleum products. The fortnightly exchange rate, however, improved by Rs0.13 due to the strengthening of the rupee against the dollar.

During the year 2001-2002, the price of petrol was increased nine times and decreased nine times while six times there was no change. Similarly, diesel price was increased 10 times and decreased 10 times while four times it remained unchanged.

The OCAC had not announced the prices of JP-1 and JP-4 without giving any reasons. The committee also gave no reasons why price adjustment had been put on hold from September 15-18.

In the last one year, petrol has become costlier by 9.54 per cent as it was selling at Rs 31.64 per litre on September 2001 as compared to prevailing rate of Rs 34.66 per litre. Similarly, diesel price has gone up by 11.19 per cent in the same period as it now priced at Rs 19.75 per litre as against Rs 17.77 per litre.

The impression that the international prices have been responsible for the increase in domestic oil prices does not click as the real reasons are different.

In the last one year, the Pakistani rupee has been appreciated by seven to eight per cent against the US dollar which means that the impact of rising oil price have already offset by the rupee surge. But when it comes to passing on the impact to end users, it could not happen.

Three main reasons have resulted in consumer price hike of main petroleum products in the last one year.

The government’s decision to increase the petroleum development levy (PDL) by at least two times in the last one year has totally nullified the impact of rupee’s shine against the greenback, resulting in price flare up of oil products.

Two more decisions like increasing the dealers’ margin to 4 per cent from 3 per cent followed by increase of commission of oil marketing companies (OMCs) to 3.5 per cent from two per cent, proved another reason for increase in oil prices at local levels.

Since the referendum process is over on April 30, consumers have seen the increase in oil products by at least three to four times.