By Admin 
The global oil market has witnessed a significant shift, with oil prices dropping considerably. For the first time in nearly three years, both UK and US crude oil prices have fallen below $70 per barrel. This dramatic decrease marks a notable reduction in international crude oil prices.
Recent reports indicate that the price of UK crude oil has dropped to $69 per barrel, while US crude oil prices have declined to $66 per barrel. This is the lowest point since December 2021. The primary cause of this significant drop in global oil prices is reduced global oil demand, despite OPEC countries maintaining cuts in their production.
In response to the global price drop, the Pakistani government has taken the opportunity to increase the Petroleum Development Levy (PDL) by Rs 10 per liter, bringing it to Rs 70 per liter. This move aims to meet the revenue target of Rs 128 billion for the current fiscal year.
According to a report by JS Global, a $5 per barrel decrease in crude oil prices could reduce Pakistan’s annual oil import bill by $900 million. As a result, inflation could see a reduction of 35 basis points. Consequently, the government has more leeway to raise the PDL to maintain fiscal balance.
JS Global’s Head of Research, Amreen Soorani, notes that a reduction in the oil import bill could reduce Pakistan’s current account deficit by $800 million, which accounts for 0.2% of the GDP. Additionally, this reduction could lead to annual savings of approximately $900 million in the country’s foreign exchange reserves, which currently stand at $9.4 billion.
The report further highlights that the reduction in the import bill and stabilization of foreign exchange reserves will allow the government to continue importing for the next two months. Soorani predicts that inflation may remain around 9% during the fiscal year 2025.
The drop in global oil prices presents both challenges and opportunities for economies worldwide. For Pakistan, the price decline has provided opportunities for increased government revenue and potential savings, offering some relief in the current economic landscape.