The recent 12.3 percent and 4.7 percent drops in retail petrol and diesel prices for the second half of this month must lessen the agony felt at the pump by those with low to middle incomes who are suffering from inflation. Even if it helps to slightly slow the current pace of price increases, it is unlikely to considerably diminish rapid inflation or lower the high cost of living. Since the beginning of the month, the government has reduced fuel prices twice to pass along to consumers the benefits of declining global crude prices and rising domestic currencies. However, an examination of the past two weekly Sensitive Price Index readings reveals that the prior decrease in fuel prices for the first two weeks of October did not avert even brief This emphasizes how manufacturers, producers, transporters, and service providers in nations like Pakistan do not react right away to changes in the public’s fuel prices, even though they are prepared to quickly include the effects of rising petrol and diesel prices in their prices to safeguard their own profits.
However, the currency rate and the global oil market’s uncertain future are the main causes of price rigidity. Because domestically, upward and downward adjustments can be significant, the current system of determining retail fuel prices twice a month only makes the situation more uncertain because it is impractical for producers, manufacturers, and service providers to change their prices in response to fluctuations in the price of petrol and diesel. Many contend that total deregulation of retail fuel pricing would contribute to more market stability and somewhat restrain price inflation. In Pakistan, the cost of fuel and the exchange rate are in fact two of the main causes of inflation. If these variables remain constant, inflation can be maintained largely under control. However, there are a number of other factors that contribute to price rigidity and rapid inflation, such as low agricultural and industrial productivity, high taxes on necessities that the majority of people in the low-middle income bracket rely on, flat economic growth, and the ineffectiveness of price control mechanisms. Only the gullible would anticipate that two erratic elements, the currency rate and the price of oil globally, would help control inflation and lower the cost of living.
