The Rs. 415 petrol price is not an international problem

The video that made Muzamil pause the AI series

The episode opens with Muzamil flagging a detour. He had planned to begin a multi-part series on AI this week — the technology, the US–China dynamic, the content stack he has been collecting daily. That is still coming. But a clip of a government minister defending the new Rs. 415 petrol price crossed his desk, and he decided one more episode on Pakistan’s economy was worth doing first.

The clip itself is straightforward. A citizen confronts the minister: every time the price goes up, so does the tax and the levy. The minister’s reply leans on a familiar argument — Pakistan’s tax-to-GDP ratio is among the three lowest in the world, comparable countries sit at sixteen to eighteen percent, and because people running crore-rupee businesses pay nothing, the state has no choice but to collect through electricity bills and petrol. “Every government comes and makes this argument,” Muzamil notes, “and Pakistan has historically failed to widen its tax base.” The question he wants to answer is whether the minister’s specific framing of this hike — international prices, IMF pressure — actually holds up against the numbers.

What the Rs. 415 price actually contains

Muzamil walks through the breakdown line by line. A year ago, when there was no active war, crude was hovering around sixty-five to seventy-five dollars. Today the screen quote shows around ninety-five dollars, but that is the American benchmark and a futures number depressed by paper contracts. The actual ex-factory delivered price Pakistan is paying, according to energy analysts, sits between one hundred and fifteen and one hundred and twenty-five dollars per barrel depending on the cargo.

Converted into rupees, the landed cost is now around 271 rupees, compared to 151 rupees a year ago — close to an eighty percent rise. That part of the story is real. But the part the minister is leaning on is not. “If we look at this from nine days ago, when petrol was 399 rupees overall, there has been a one rupee difference” on the international component. The most recent jump from Rs. 399 to Rs. 415 is not driven by global crude. “This most recent increase is not because of international prices,” Muzamil says plainly. “That is not necessarily true. That is not the full picture.”

The IMF is not asking for this

The next leg of the argument is the IMF. A common defence is that the Fund is forcing the government’s hand on petroleum levy. Muzamil checks the number. “The limit the IMF has placed on you is 80 rupees” — and that ceiling was already being hit last year, when the levy stood at 78.02 rupees per litre.

The current levy has moved well past that. The extra roughly Rs. 37 per litre that has pushed the headline price from Rs. 399 to Rs. 415 is, in Muzamil’s reading, a sovereign choice. “This is the government’s own interest, its own opinion. It may be right, it may be wrong, we will discuss that in a moment. But it is not the IMF.” The rest of the receipt — sales tax, dealer margin, OMC margin — has not moved meaningfully in twelve months, which is why dealers and oil marketing companies are absorbing losses as demand destruction sets in. The only beneficiary of the latest hike is the federal exchequer.

Why levy, and not general tax

If the goal is revenue, why not raise general taxes? Muzamil pulls in a structural answer that the minister’s clip never mentions: the NFC award. Under the existing federal-provincial revenue-sharing formula, most federally collected tax money flows out to the provinces. A general tax increase therefore does very little for the federal government’s own balance sheet.

Levy is a different animal. “Levy is not a generic tax. Its amount goes directly to the federal government in total. It is not distributed to the provinces.” That, he argues, is why fuel keeps being squeezed even as the minister talks about broadening the tax net. The federal government cannot tax the people it actually needs to tax — and even if it did, it would have to share the money.

Who, then, is not paying? Muzamil is specific. “Who is not paying tax? The retailer is not paying. That is your vote bank. The agriculturist is not paying.” The industrial class and the landed class are protected; the consumption-taxed citizen is not. The narrative of a “lazy public refusing to pay tax” lets the state avoid the politically expensive fights and keep reaching for the levy lever instead.

The strategic reserves that were never built

India comes up as a counter-example, but not as a model Pakistan could have copied wholesale. India has held its petrol price stable through the recent oil shock by drawing down forex reserves — roughly thirty-eight billion dollars in two months, against a war chest of seven hundred and twenty-eight billion. “That is a structural reform you could not do, fine,” Muzamil concedes. “But you could at least have done this.”

The “this” is strategic petroleum reserves. For years crude sat around sixty-five dollars. Pakistan built an LNG terminal in that period; it did not build a meaningful fuel stockpile. “You knew that energy is one of the most important and integral components of your economy and that your national security is literally tied to it. You should have built strategic reserves. Whose fault is it? The government’s. Because of the government’s lack of planning, the poor man is getting crushed today.”

The Gulf is slowing down, and remittances will follow

A section in the back half of the episode pulls the lens out to the external account. The piece of the puzzle most people miss, Muzamil argues, is what is happening in the Gulf. Energy export revenues in Qatar, Bahrain and the UAE are down forty to sixty percent. Tourism in the UAE, by one report he cites, is down ninety percent.

Both of those numbers matter for Pakistan because both of them feed the sectors that employ Pakistani expatriates — taxi driving, hospitality, banking, the long tail of services. “It is a leading indicator. If revenue is down there, eventually in the next six to twelve months it will reflect” in layoffs, and layoffs will reflect in remittance receipts. Remittances are one of the few inputs holding the rupee together. “Remittances are under one hundred and ten percent stress.” If that pillar weakens, the dollar gets stronger against the rupee, and every dollarised cost — including the crude Pakistan imports — goes up again.

Protect yourself: get out of rupees, into dollarised assets

The closing argument is unusually direct. Muzamil does not believe the official line that fuel or electricity prices are coming back down. “This is all drama — that the price of electricity will come down at some point, that the price of fuel will come down at some point. Already there is stress. Plus the government takes loans, the fractional reserve system runs, cash is thrown into the market continuously, so prices will always go up. They will never come down.”

The practical conclusion: if you are holding rupees, convert them. “Try to go for a dollarised commodity.” The specific examples he gives are solar — where the ROI is strong against current electricity tariffs and stronger still once you fully cut over — and dollarised transport like an electric bike or an EV, which lets you cut the petrol line item that is now your largest cost centre. The framing is not investment advice in the equity sense. It is a defence against currency depreciation: park value in something that produces, rather than in a currency that the state is structurally incentivised to dilute.

By the end of the conversation Muzamil has answered the question he set out to answer. The Rs. 415 number is not what the minister says it is. International crude explains the price that existed nine days ago. The extra Rs. 37 on top is a levy choice the federal government made because it cannot — or will not — tax the people who can actually pay.