Whether petrol prices are too high or not is a matter of common debate. In the recent past the prices of petrol are frequently changing, sometimes increasing and at other times decreasing though by a margin of Re. 1/2 to 1 Re. on either side, but generally the prices have arranged around Rs. 30-33/ liter.
Importance of petrol in daily life is quite apparent. Petrol is a strategic fuel for economic life line. Its price affects cost of production in a variety of ways as with the increase in its prices, cost of transportation of import, export and goods for local consumption goes up. Besides air, rail, road and sea transportation rates rise with the escalation in the price of petroleum.
This article examines the question whether the price of super petrol which has been fixed by the govemment till recently and now by the petroleum cos. is too high in Pakistan in comparison with other countries keeping in view their respective per capita incomes.
For this study, we have relied on figures available for the World Bank, "2001 World Development Indicators" and World Development Report 2000-2001 for GNP per capita measured at purchasing power parity rate basis in $ for 1999 and super petrol price in $/liter for Pakistan and other selected countries.
In order to work out how much oil is more or less expensive in Pakistan than other countries, we divide per capita income by petrol price (in $) to arrive at the quantity of petrol liters which can be purchased.
The above-mentioned countries are the countries with the least expensive petrol in the world ranging between $ 0.02 to 0.25 per liter which means the prices of petrol in Pakistan are more expensive by 27 times to 2 times without regard to their purchasing capacity, i.e. their per capita income. If their per capita incomes are taken into account, the prices of petrol in Pakistan would became still more expensive to a ratio between 47 times for Turkmenistan and 31 times for Iran.
Many of the above mentioned 10 countries are also petroleum producing countries and hence could afford to keep prices down. The petrol price in Turkmenistan is only 3.77% of the price of in Pakistan with due weight given to their respective per capita incomes or Pakistan petrol price is 47 times more expensive than in Turkmenistan.
In the following table the price of petrol in Pakistan is compared with the top ten most expensive fuel countries along with their per capita incomes.
| RATIO BETWEEN PETROL PRICE AND PER CAPIA INCOME | ||||||
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The price of petrol between Pakistan and other most expensive fuel countries is higher 100-175% but if the per capita income is taken into account, the difference goes up. It is estimated that the petrol price in Pakistan is worked out to be as expensive as 6.64 times in Japan, 6.75 times in Norway, and about 5.38 times in UK if per capita incomes are considered.
Source: 1. 2001 World Development Indicators, World Bank.
2. World Development Report, 2000-2001, World Bank.
The following table compares petrol price in Pakistan vis-a-vis other income group countries.
| PETROL PRICES AND GNP PER CAPITA IN PAKISTAN AND OTHER INCOME GROUP COUNTRIES | |||||
| Region | Fuel price $/liter | In Pakistan Rs./liter@ Rs. 60/$ | Per Capita Income | PCI equivalent to petrol (litres) | Times petrol price higher in Pakistan |
| Pakistan | 0.53 | 31.80 | 1757 | 3315 | — |
| World | 0.54 | 32.40 | 6490 | 12019 | 3.62 |
| (Medium) | |||||
| Low income | 0.49 | 29.40 | 1790 | 3653 | 1.10 |
| Middle income | 0.48 | 28.80 | 4880 | 10166 | 3.06 |
| High income | 0.86 | 51.6 | 21763 | 25306 | 7.63 |
| Europe EMU | 1.04 | 62.40 | NA | NA | NA |
| Source: "2001 World Development Indicators", World Bank | |||||
The above table reveals that although the price of petrol in terms of dollars is quite comparable with most of the rest of the world ranging around $0.50/litre, yet the cost is too high if the per capita income of Pakistan is taken into account.
While a Pakistani can buy 3315 liters of petrol based on his per capita income/ year, a high income and middle country man can buy 25306 and 10166 liters of petrol with his income which are 7.63 and 3.06 times higher than Pakistan. If comparison is made between the world average and Pakistan, the ratio roughly is 3.62 times higher. However, for low income countries the average price is $0.49 /liter, a little less than Pakistan and GNP per capita of $410, and thus Pakistan is slightly better off.
In the following table, the per capita income (at PPP basis) and petrol price in Pakistan vis-a-vis other major selected countries have been compared:
| PER CAPITA INCOME AND PETROL PRICE | ||||
The composite table shows that the countries with the highest fuel prices have around 100-125 % higher prices than Pakistan while their per capita incomes are much higher by average 3 to 12 times. However, in comparison with low income countries, fuel prices are lower by about 8% vis-a-vis Pakistan with per capita income higher by only 2%, which shows that petrol prices are high. If you look at China, India and Bangladesh, the fuel prices in Pakistan are cheaper in China and Bangladesh but less expensive than in India.
For which data are available, there are 158 countries having per capita income, on purchasing power parity basis, higher than Pakistan out of 206 countries. In case of fuel prices, Pakistan is 59th amongst the highest fuel price countries, as given in the table ahead.
| PAKISTAN'S RANKING: PER CAPITA INCOME AND PETROL PRICE | ||
| . | Per Capita Income ($) | Fuel price $/liter |
| Pakistan (No.) | 1757 (159th) | 0.53 (7 countries) 59th |
| No of countries | 158 | 3 |
| higher than Pakistan | ||
| No of countries | 47 | 58 |
| lower than Pakistan | ||
Petrol price in Pakistan is $0.53 per liter with the per capita income of $ 1757 at PPP. On the basis of world average per capita income of $6490 and the petrol price of $0.54 /liter as against Pakistan's per capita income of $1757, the price of petrol should have been $0.15 or about Rs. 9 liter as against about Rs. 31/litre about 3.4 times more. There are 7 countries with the same petrol price in dollar, i.e. $0.53.
On the basis of both petrol price per capita income and the quantum of petrol that could be purchased with the per capita income, the following 10 countries have been listed with the lowest and highest petrol prices.
| REVISED LIST OF LOWEST AND HIGHEST OIL PRICE COUNTRIES | |
| A 10 Lowest Countries | B 10 Highest Countries |
| 1. Turkmenistan | l. Burundi |
| 2. Iran | 2.Tanzania |
| 3. Austria | 3.Zambia |
| 4. Singapore | 4.Malavi |
| 5. New Zealand | 5. Mali. |
| 6. Switzerland | 6. Madagascar |
| 7. Australia | 7.Niger |
| 8. Canada | 8.Chad |
| 9. Venezuela | 9.Ethopia |
| 10. USA | 10. Bulkina Fasu |
Out of 124 countries for which data of both petrol price and per capita income are available, Pakistan is ranked at 33rd with highest price of oil and 91 countries with lower petrol price through this methodology which takes into account both the factors simultaneously. Most of these countries with higher petrol prices belong to Africa or have smal1 economies.