Oil Hits $100/Barrel — How It Affects Gold, Pakistan Rupee & Petrol Prices
Brent crude oil is trading above $100 per barrel for the first time since 2022, driven by the Strait of Hormuz crisis and supply disruptions. This has cascading effects on everything from your petrol pump price to gold investments.
Gold and Oil — The Connection
Gold and oil are often correlated because both are dollar-denominated commodities and both respond to inflation expectations. When oil prices rise, inflation fears increase, and investors typically move into gold as a hedge. However, the relationship is complex — high oil prices can also lead to higher interest rates, which are negative for gold.
In the current environment, gold has not fully benefited from high oil prices because of the US-Iran peace talk uncertainty, which has created a "wait and see" mood among investors.
Pakistan Petrol — What to Expect
Pakistan's current petrol price of Rs. 403.78/litre was set when crude was around $85-90/barrel. With crude now at $100+, the next OGRA revision could bring a further increase of Rs. 15-30/litre if oil stays elevated.
Pakistan also faces a compounding problem: the PKR has been weakening, meaning even if crude oil prices in USD don't change, the cost in Rupees rises automatically. The current USD/PKR rate of approximately 278 is already very high historically.
India Petrol — Government Absorbing Costs
India, which imports about 85% of its oil, is partially shielding consumers from the full impact of high global prices through reduced excise duties. However, if crude stays above $100 for an extended period, state-owned oil companies (IOC, BPCL, HPCL) will face pressure to revise prices upward.
UAE — Insulated But Not Immune
The UAE, as an oil producer, benefits from high oil prices in terms of government revenue. Consumer petrol prices in the UAE are tied to global prices but are revised monthly by the government. Current UAE petrol at AED 2.89/litre is still relatively low compared to Europe and North America.
How Long Will $100 Oil Last?
The key variable is the Strait of Hormuz. If a peace deal is reached and the strait fully reopens, oil could quickly fall back to $70-80/barrel, bringing relief to consumers worldwide. If the conflict escalates, $120+ is not out of the question.