Imapct of oil Price on the economy of world specifically Diesel prices.

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effect of fuel price hike on economy,diesel prices, oil prices

In Pakistan, the price of Diesel was increased by Rs 59 on Wednesday night, after which its new price went up to Rs 264 per liter. This increase in prices will hit the farmers. The reason for this is that Diesel is mostly used in agriculture in Pakistan, and therefore there is a strong possibility that food prices will also go up after the increase. On the other hand, Diesel is also used for transport and generators.

Former Finance Minister Shaukat Tareen, after the increase in petrol and diesel prices by the government of Pakistan, said that it will impact transport, agriculture and trade and will increase the overall inflation by 30%. Rising prices for petroleum products due to the Russian invasion of Ukraine have caused concern around the world, and the problem of inflation is becoming more serious, affecting many of the world’s economies.

Diesel prices hit an all-time high in June, and the problem is now causing even more headaches than petrol. Because diesel is the fuel used in most cargo vehicles, and our food, medicine and even the petrol that we fill in our cars at the service stations come from diesel trucks. These diesel trucks deliver cargo to ships that carry it around the world. Many buses and trains also use Diesel, which is the fuel on which industries depend, even if it is a field tractor. That is why the shortage of Diesel is causing serious problems all over the world. If demand continues to outpace supply, prices are likely to rise further.

Global crisis of Oil

The lack of this fuel is causing transportation problems in places like Sri Lanka, Yemen and many African countries. Local communities and farmers are also protesting against the increase in diesel prices. Another region where the crisis is a cause for concern is Europe. Unlike in other parts of the world, many drivers of private cars also use Diesel because it is a more efficient and less polluting energy source than petrol. Before Russia invaded Ukraine, Europe imported about two-thirds of its crude oil from Russia, producing Diesel. Still, after Western economic sanctions on Moscow, Europe relied heavily on the United States for its Diesel.

Although this reduced the scarcity, with record prices on both sides of the Atlantic, people’s pockets were badly affected. Today British people pay more than 100 pounds to fill their car. Truck drivers in the United States pay ڈالر 1.5 per liter, the highest price ever recorded in the country.

Shortage fuel in Argentina

Diesel shortages on the other side of the American continent create more chaos. There are long queues of diesel trucks on the routes to central and northern Argentina, where sales are limited to 20 liters per vehicle in many places. As of early June, 19 of Argentina’s 23 provinces had supply problems, according to a study by the Argentine Federation of Freight Transport Business Entities. “Diesel shortage threatens to further damage Argentina’s ailing economy at this critical juncture. Soybeans, corn and sunflowers, among the country’s largest exports, will also be affected. The shortage of Diesel in Argentina has been exacerbated by worldwide supply shortages, including local factors, which have further complicated the situation.

About a third of the Diesel used in the country is imported, and the effects of the war in Ukraine have made it harder for oil companies to obtain, not only because of lower domestic prices imposed by the government. Even importing it at current prices is not profitable for them.

Other causes of the crisis

The Russian attack is not the only reason for Diesel’s disappearance. At the end of February, before Vladimir Putin’s offensive, global demand for Diesel had already exceeded supply. According to experts, the main reason for this discrepancy was the coronavirus outbreak. In 2019 and 2020, quarantine stopped the wheel of the economy and reduced fuel consumption, which caused refineries to reduce their diesel production; some even closed their doors permanently.

In 2021, when the world was starting to open up, the demand for Diesel exceeded the supply. One of the reasons for the increase in this problem was the rapid resumption of commercial flights as jet fuel is made from crude oil as much as Diesel. Stocks had fallen to their lowest levels since the 2008 financial crisis in Europe and the United States.

In this situation, President Joe Biden was discussing the option of using an emergency stockpile of Diesel, which had been built in the country’s northeast two decades ago and had only been used once. Has been used. The government’s main goal will be to increase fuel supply at lower prices, which has led to the highest inflation in the United States in four decades, which could affect the performance of the ruling Democratic Party in the November congressional elections.

Impact of fuel price on the economy

“The global shortage of Diesel indicates that the economic cycle is reaching its peak, and there is bound to be a period of slow growth or even recession to bring back consumption according to production. The World Bank’s latest economic report, released this week, confirms that growth is slowing sharply and warns that this could lead to ‘stagnation,’ with less economic growth. If there is growth, then, on the other hand, inflation is at a high level. The World Bank estimates that the global economy will grow by 2.9% in 2022, which is half the rate reached in 2021 (5.7%).

The Organization for Economic Co-operation and Development (OECD) has lowered its global economic growth forecast for this year from 4.5 percent to 3 percent and estimates that the average annual inflation rate in its 37 member countries will be 8.5 percent.

Read more

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