Impact of oil prices on Pakistan's economy.

1. Effect of oil prices on
Pakistan’s economy

2. Outlines
 Introduction
 Relationship between Oil Prices and
economic growth
 Effects on micro and macroeconomics
 Pakistan Oil Import
 Oil prices in Pakistan
 Impact of oil prices on Economy

3. Introduction:
 Crude Oil, often
called “black gold” is
naturally occurring,
unrefined petroleum
product composed of
hydrocarbon
deposits.

4. Introduction
Trade of crude oil across the globe is one major
factors in determining the G.D.P and financial
policies of various countries across the globe
Crude oil exporting countries prefer to sell it for
higher prices because it helps them to increase
their foreign reserves to control inflation
Oil is a crucial economic input and Pakistan’s
growth, production levels, and price levels are
affected significantly by oil price volatility.

5. Increase in oil prices:
 Oil price increases are generally thought to
increase inflation and reduce economic growth.
 In terms of inflation, oil prices directly affect the
prices of goods made with petroleum products.
 Its products underpin modern society, mainly
supplying energy to power industry, heat homes
and provide fuel for vehicles and aeroplanes to
carry goods and people all over the world.

6. Relationship between Oil
Prices with Economic Growth
 Oil and gas are the most important inputs
that countries use in their production
process.
 For this reason, changes in oil-gas prices
affect economic growth, which is the most
important macroeconomic performance
indicator.

7. oil prices causes recession:
 Why do high oil prices cause
recessions?Periods of high oil prices
frequently lead to periods of recession shortly
after.
 There are two main reasons for this. Higher
oil prices reduce disposable income leading
to lower spending. Higher oil prices push up
inflation causing Central Banks to increase
interest rates.

8.  High oil prices can drive job creation and investment
as it becomes economically viable for oil companies
to exploit higher-cost shale oil deposits.
 However, high oil prices also hit businesses and
consumers with higher transportation and
manufacturing costs.
 Unemployment, interest rates, inflation, GDP, all fall
into Macroeconomics. Consumer equilibrium,
individual income and savings are examples of
microeconomics
How do high oil prices affect
the economy on a micro level?

9. Are oil prices macroeconomic
variables?
 Keywords: Oil Prices, Economic
Growth, Export, Exchange Rate,
Inflation, Oil represents one of the
most important macroeconomic
factors in the world economy and
economic performance of countries is
highly correlated with oil prices.

10. How does oil influence the
macro economy?
 Oil price increases can also stifle the
growth of the economy through their
effect on the supply and demand for
goods other than oil. Increases in oil
prices can depress the supply of other
goods because they increase the costs of
producing them.

11. Pakistan oil import
 Pakistan is one of the richest
countries in the world which have a
large amount of natural resources
available including coal, gas,
gemstones, copper, minerals and
gold reserves, oil, iron, titanium
and aluminium and so on

12. How much oil does Pakistan
produce?
 In 2019, the country
produced 4.3 million metric
tons of crude oil, enough to
meet only 20 percent of the
country's total petroleum
requirements.

13. Where does Pakistan
import its oil from?
 Pakistan imports Crude Petroleum primarily from:
United Arab Emirates ($1.04B), Saudi Arabia
($696M), Kuwait ($76.1M), South Korea ($55.9M),
and Oman ($24.8M). The fastest growing import
markets in Crude Petroleum for Pakistan between
2019 and 2020 were Kuwait ($76.1M), South Korea
($55.9M), and Oman ($24.8M)

14. Why oil prices increase?
 When crude oil prices move, petrol and diesel prices
usually follow.
 Fuel prices have increased sharply because the price for
crude oil, which is used to make petrol and diesel, has
gone up.
 Crude oil was cheaper at the beginning of the Covid
pandemic, because many businesses temporarily closed
and demand for energy collapsed.
 As life returned to normal, the demand for energy
increased

15. Why oil prices are increasing in
Pakistan?
 IMF guidelines or pressure is the main reason
behind increase in oil prices.
 Agreement with IMF:
 The agreement with the IMF requires full
price recovery plus PLD taxation of Rs30-50
per litre and GST of 17 per cent. This means
more has yet to come.

16. Impact of oil
prices on
economy

17. How does the price of oil affect
the economy?
 Oil prices are closely related to economic
growth.
 Oil price increases are generally thought to
increase inflation and reduce economic growth.
 In terms of inflation, oil prices directly affect the
prices of goods made with petroleum products.
 Oil prices indirectly affect costs such as
transportation, manufacturing, and heating.

18. Inflation: The annual inflation rate in
Pakistan jumped to 21.3 percent in June
of 2022, from 13.8 percent in the
previous month. It was the highest
inflation rate. There is a stronger
correlation between oil prices and
producer prices. The producer price
index measures the average selling
price from domestic producers and is
more closely linked to the input costs,
such as oil prices.

19. What is the link between oil prices
and inflation?
Oil is a raw commodity in many goods ,such as
Petrol(gasoline)and diesel
Jet fuel
Plastics
Petro-chemicals
Asphalt
Cosmetics
Propane cooking gas
Therefore oil is price rise the cost of producing these goods rises
The biggest use oil is transportation (66%)therefore when oil prices
rise all goods which are transported will be effected by higher transport
costes

20. Industrialization:
Industries Sectors that are negatively
impacted from rising crude oil prices
Paints. Out of total raw material costs
incurred by paint manufacturers, 50%-60%
of this cost accounts to crude and crude
derivatives. ...Tyres. ...Oil Marketing
Companies. ...Aviation Sector. ...Cement
Sector.
These businesses benefit indirectly from
lower oil prices, as consumers looks for
places to spend the money that they save on
fuel.

21. Agriculture Sector
Due to a huge change in oil prices
agricultural sector affected badly,
because the price of oil
petroleum is high and the
farmers produce less. when
production low then ultimately
the prices are high and cause the
increase in inflation rate.

22. Poverty:
Impacts on poverty are relatively
high compared to the changes in
income and expenditures. Oil
and gas exporting countries can
decrease their poverty numbers
when expenditures increase,
while oil and gas importing
countries see their poverty
increase. The impacts on hunger
rely on changes in food
availability.

23. Oil price
lower production
Demand increase
import
low export
prices rise
Inflation

24. conclusion
Oil price increases are generally
thought to increase inflation and
reduce economic growth. In terms
of inflation, oil prices directly
affect the prices of goods made
with petroleum products