ISLAMABAD – Situation between arch-enemies Israel and Iran is escalating quickly as both sides continue to carry out attacks, causing casualties and massive damage, especially at Natanz nuclear site, which is crucial to Iran’s nuclear program. As world witnessed Israeli aggression, that triggered this chaos, several countries including Pakistan will face the heat of this escalation.
Amid risk of wider and longer-lasting conflict in the region, Pakistan is facing challenges in meeting its petroleum levy (PL) collection target of Rs1.6Trillion this FY amid rising global oil prices triggered by Israel’s recent attacks on Iran.
After the conflict, international crude oil prices jumped significantly, causing projected increase of Rs 4.38 per litre in petrol and Rs 5.02 per litre in high-speed diesel prices from June 16. These hikes, combined with higher customs duties and a slightly stronger US dollar against the Pakistani rupee, are expected to impact domestic fuel costs further.
Despite collecting Rs834 billion in Levy in fiscal year 2024-25, PML-N ledgovernment only achieved two thied of its revised target, and now escalating fuel prices may reduce consumption, potentially putting next year’s Petroleum Levy target of Rs 1.4 trillion at risk.
To bolster revenue, the government removed Rs60 per litre cap on petroleum levy in March, resulting in additional Levy charges of Rs 18.02 on petrol and Rs 17 on Diesel per litre. Officials estimate this move could generate around Rs 300 billion annually.
On the other hand, Oil Marketing Companies witnessed 10pc year-on-year growth in sales for May, totaling 1.53 million tons, despite rising prices. Oil and Gas Regulatory Authority will finalize petroleum prices on June 15 after reviewing international market trends and currency fluctuations over the prior 15 days.
Global Oil Prices
The conflict between Israel and Iran also raised fears about disruptions to Strait of Hormuz – key oil shipping route. This has caused oil prices to spike and markets to fall. While shipping continues cautiously, any closure could cause a major global oil shock and worsen inflation.
The International Energy Agency has emergency reserves, but using them risks depletion. OPEC+ plans a small production increase amid growing pressure. The conflict threatens global energy supply and market stability.
Brent crude stays around 7-8% higher than last price, trading at $74.23 barrel.
Iran to intensify attacks on Israel, threatens allies’ military bases
