Islamabad: The government of Pakistan has decided to review petroleum prices on a weekly basis in response to rising volatility in global oil markets triggered by tensions in the Middle East.
The decision aims to protect the domestic oil supply chain from rising premiums, freight charges, and insurance costs as geopolitical tensions threaten key energy shipping routes.
According to officials, the move follows warnings from the Petroleum Division about a potential oil supply disruption due to instability in the Gulf region.
Global Oil Market Volatility
The international oil market has recently experienced sharp fluctuations as the conflict in the Middle East has affected shipping routes through the strategically important Strait of Hormuz.
The narrow maritime corridor is one of the world’s most critical energy transit points, carrying nearly 20 percent of global oil supplies. Any disruption in the route can lead to delays in shipments, higher freight rates, increased insurance premiums, and sudden price spikes.
Energy experts warn that import-dependent Asian economies are particularly vulnerable to such disruptions due to limited short-term alternative supply sources.
Pakistan’s Heavy Reliance on Imported Fuel
Pakistan remains heavily dependent on fuel imports from Gulf countries. During the first eight months of the current fiscal year, the country imported approximately 3.6 million metric tons (around 70%) of motor spirit (petrol) and one million metric tons (21%) of high-speed diesel (HSD).
These imports supported domestic consumption of 5.2 million metric tons of petrol and 4.8 million metric tons of HSD during the same period. Officials say any prolonged disruption in supplies could impact transportation, logistics, and broader macroeconomic stability.
Purpose of Weekly Price Adjustment
Government sources said shifting from the current fortnightly system to a weekly pricing mechanism will help reduce the lag between international oil price movements and domestic price adjustments.
The policy is expected to discourage speculative hoarding, improve market transparency, and align import costs with retail fuel pricing.
New Pricing Mechanism Explained
Under the revised system, authorities will calculate petroleum prices using a five-day average benchmark from Monday to Friday based on Gulf Arab Platts assessments for each petroleum product.
The calculation will also include the weighted average premium of cargoes imported by Pakistan State Oil (PSO) that are discharged or partially discharged and available for sale in the following week.
If no new cargoes are available, the last recorded weighted average premium of PSO shipments will be used in the price calculation.
In addition, the weighted average of PSO’s import incidentals and customs duties will be incorporated into the final price determination.
Exchange Rate and Import Cost Adjustments
The current exchange rate adjustment mechanism based on PSO imports will remain in place. However, authorities noted that PSO’s exchange rate for high-speed diesel imports may not fully reflect the market rate.
To address this, the weighted average exchange rate used by PSO for motor spirit imports during the same period will serve as the benchmark for calculating exchange losses for other oil marketing companies importing HSD.
Any resulting differential claims from other companies will be settled through the inland freight equalisation margin (IFEM) mechanism.
Role of OGRA in Weekly Pricing
Under the new arrangement, the Oil and Gas Regulatory Authority (OGRA) will submit indicative petroleum price calculations every Friday for review by the relevant government committee.
After the committee’s decision, OGRA will finalize prices using the latest Platts assessment data along with updated PSO import information.
Changes in the petroleum levy or climate support levy will be notified by the Petroleum Division on the advice of the Finance Division before OGRA announces the final prices each week.
Background Policy Framework
The Economic Coordination Committee (ECC) had previously approved a policy in November 2022 allowing differences in high-speed diesel import premiums paid by oil marketing companies to be adjusted through IFEM.
Officials say the new weekly pricing model will strengthen supply management and help Pakistan respond more quickly to global oil market disruptions.