With the ongoing war in Iran roiling global energy markets and driving up fuel prices in Pakistan, the government is reportedly mulling several contingency measures reminiscent of the Covid era as part of a strategy to reduce petroleum consumption. Some of the measures discussed include allowing up to 50 per cent of employees to work from home, declaring Friday an additional weekly off during Ramazan and closing markets earlier in the evening. No definitive decision has been made as yet and it is unclear if the measures will be expanded to institutions like schools, with a potential return to online classes. Thus far, the Punjab education minister says no such plans are underway. However, with the fuel prices where they are now, work and classes from home might quickly become necessities rather than options. Both the prices of diesel and petrol have been raised by Rs55.0 per litre and the price of kerosene has been almost doubled to Rs318.81 per litre from Rs188.73. Travelling to and from work and school could become quite painful indeed under these circumstances and the government might not even have to ask people to work from home and be mindful of their energy consumption. And it is not like one can even plan around these prices remaining where they are for the usual fortnight, with the petroleum pricing mechanism now shifting to a weekly basis. Will there be more pain in store for us, come next week?
With the Pentagon preparing for the war on Iran to last until September, according to some reports, there could be more pain for many weeks to come. And this is just looking at travel costs. If measures like closing markets early are indeed implemented, then many traders and businesses might be looking at a rough end to Ramazan and Eid, which is usually a key earning period for them. This is when people plan outings, shop and visit relatives. Instead, many households could be forced to cut back sharply as transport and logistics costs ripple through the wider economy. Pakistan’s vulnerability to such shocks is not accidental. The country produces only a small fraction of the petroleum it consumes, importing the overwhelming majority of its fuel needs. Transport alone accounts for the bulk of national fuel consumption, which is why governments instinctively look to measures such as reducing commuting, staggered work schedules or remote work arrangements when oil prices spike. Even then, the impact is limited. Research suggests that demand for transport fuels in Pakistan does not fall dramatically when prices rise.
In such circumstances, policymakers have few painless options. Passing through higher international prices is fiscally unavoidable, particularly under IMF constraints that limit subsidies and reductions in petroleum levies. But that does not mean the broader economic burden should fall entirely on ordinary households and salaried workers. If higher prices are unavoidable, the government must at least ensure that relief elsewhere in the fiscal system offsets some of the shock – whether through targeted support for essential sectors such as transport and agriculture or through tax relief in the coming budget. Moments like this also highlight a deeper structural problem. Every geopolitical crisis in the Gulf reminds Pakistan how exposed its economy remains to imported fuel. Short-term measures may help manage the immediate shock, but they do not solve the underlying vulnerability. Reducing dependence on oil through more efficient transport systems, expanded public transit and greater investment in renewable energy will ultimately be the only durable way to insulate the economy from wars and crises that occur thousands of kilometres away.
