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Will the price of petrol and diesel in Pakistan be reduced by the import of Russian crude oil?

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ExxonMobil operation near Chicago, IL, summer of 2014

Will the price of petrol and diesel in Pakistan be reduced by the import of Russian crude oil?
In Pakistan, the price of one liter of petrol is Rs 262 while one liter of diesel is Rs 253. In the last year, the prices of oil products have recorded a huge increase due to which people are suffering.

In May last year, a liter of petrol was available at Rs 150 and a liter of diesel at Rs 144. Although the current government has reduced the price of petrol and diesel in a month, the price of diesel and petrol is still Rs. reached

The reason for the rising prices of diesel and petrol in the country is attributed to the increase in oil prices in the international market, on the other hand, the value of the Pakistani rupee has decreased by more than a hundred rupees against the dollar.

Pakistan relies on imports of crude oil and petroleum products for more than 80 percent to meet its domestic demand for diesel and petrol, which forms a major part of the import bill.
At the beginning of last year, during the Tehreek-e-Insaf government, the import of crude oil from Russia was announced and the then Prime Minister Imran Khan announced the plan to import cheap crude oil from Russia, but in April 2022, the Tehreek-e-Insaf government After the collapse, it was kept quiet in the early days of the current coalition government. However, work on it resumed in the last quarter of 2022.

Pakistan placed its first crude oil import order from Russia a few weeks ago and now this crude oil is going to reach Pakistan in a few days. But with the import of Russian oil, will the price of diesel and petrol also decrease for the common consumer?

According to the experts and officials of the Russian crude oil importing refinery, it is not possible to reduce the prices for consumers in Pakistan immediately. So what is the reason for this?

How much crude oil is Pakistan importing from Russia?
Pakistan placed an order for the import of crude oil from Russia at the end of April, which has not yet arrived. The first shipment of Russian crude oil will arrive at the Pakistan Refinery Limited operating in the country, which will refine the crude oil.

Pakistan Refinery Limited Chief Executive Officer Zahid Mir said that the first cargo is one hundred thousand tons of crude oil, which is seven hundred thirty-five thousand barrels. Zahid Mir said that the ship carrying Russian oil has reached Oman and will soon reach Pakistan. Zahid Mir refrained from telling the price of Russian crude oil and said that he cannot tell it at present.

Minolta DSC

It should be noted that Pakistan’s Minister of Petroleum, Dr. Mossadegh Malik, had also refrained from telling the price of Russian crude oil in response to this correspondent’s question in Karachi. He had said that he would not comment on the Russian crude oil commercial deal for now.

Will the price of diesel and petrol be reduced for the common consumer with Russian crude oil?
According to Zahid Mir, the first cargo will come to the Pakistan refinery, which is a little more than seven million barrels, but the daily consumption of crude oil in the country is three million barrels.

If seen from this calculation, immediately the import of this Russian oil will not reduce the price of petrol and diesel for a common consumer.

He said that this first cargo is a ‘trial cargo’. After refining this crude oil, it will first be determined how much petroleum products will be produced from it, i.e. diesel, petrol, and furnace oil.

Zahid Mir said that the first cargo is only for one refinery and it is not right to expect that the price will come down.

He said that the price of petrol and diesel in the country will decrease when the import of crude oil from Russia is regularly for a long period and this crude oil is coming to all the refineries.

Dr. Aafia Malik, an expert in economic affairs at the Pakistan Institute of Development Economics, said in this regard that the price reduction in Pakistan may come when we start importing diesel and petrol from Russia.

He said that the first cargo of Russian oil going towards Pakistan at this time is going to be more furnace oil and less diesel and petrol.

Zahid Mir also confirmed to Aafia Malik that the quantity of furnace oil will be more than this Russian oil. He said that crude oil coming from Russia will be mixed with crude oil coming from the Middle East to produce petroleum products.

Pakistan’s Minister of Petroleum, Dr. Mossadegh Malik, also rejected the possibility that the immediate import of oil from Russia would bring down the prices of diesel and petrol locally.

Khurram Hussain, the senior journalist in economic affairs, said in this regard that petroleum prices are not going to decrease for consumers from the first consignment. If this trend continues and if this crude oil can be imported in huge quantities in the future, then it might be possible.

When Khurram Hussain was asked if this is only an attempt by the present government to counter the narrative of Tehreek-e-Insaaf, he disagreed and said that it is an attempt by the petroleum minister of the present government, but the cost is known. Only later will it be known how economically beneficial it is.

How efficient are Pakistan’s refineries in terms of Russian crude oil?
Regarding crude oil coming from Russia, Dr. Aafia Malik said that Pakistani refineries can process crude oil coming from Russia. However, according to his information, more furnace oil will be made from Russian crude oil because according to the technical feasibility of this oil, it produces more furnace oil and less diesel and petrol.

He said that the cost of converting this crude oil into petroleum products will also be high. Compared to this, the refineries operating in India are producing more diesel and exporting it in addition to the domestic requirement.

Zahid Mir said in this regard that the issue of higher production of furnace oil from incoming crude oil is correct, the reason for this is the structure of Pakistani refineries and their technology.

He said that India is also buying this crude oil, but its refineries have more modern technology and the refineries there are ‘deep conversion’ refineries that extract more diesel and petrol from crude oil and less furnace oil.

He said that compared to this, Pakistan’s refineries have old technology, which produces more furnace oil than crude oil.

He said that if the refineries in Pakistan are also upgraded, they can benefit more from it. According to him, a policy has been prepared for the upgradation of refineries, but unfortunately, it has not been approved yet.

It should be noted that Russia supplied more than sixteen million barrels per day to India in April and the oil purchased from Russia accounts for 40% of India’s oil product imports.

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