Pakistan considers daily petrol price mechanism amid global oil market volatility

Rising geopolitical tensions in the Strait of Hormuz have intensified uncertainty in global energy markets, prompting the Pakistani government to review its petroleum pricing mechanism.

Rising geopolitical tensions in the Strait of Hormuz have intensified uncertainty in global energy markets, prompting the Pakistani government to review its petroleum pricing mechanism. Authorities are now considering replacing the existing weekly fuel price adjustment system with a daily pricing model to better reflect fluctuations in international oil markets.

According to officials familiar with the discussions, the proposed mechanism would significantly reduce the federal government’s direct role in determining petroleum prices. Instead, the Oil and Gas Regulatory Authority (OGRA) would be empowered to independently calculate and announce the prices of petrol, high-speed diesel (HSD), light diesel oil (LDO), and kerosene every evening.

If approved, the revised fuel prices would come into effect from 12:00 midnight each day, allowing domestic fuel rates to respond more quickly to changes in global crude oil prices and currency movements.

The proposal was reviewed by the Petroleum Price Reform Committee, headed by Federal Petroleum Minister Ali Pervaiz Malik. The committee examined various options aimed at making Pakistan’s fuel pricing system more transparent, market-driven, and responsive to international developments.

Sources said the committee is expected to submit its recommendations to Prime Minister Shehbaz Sharif, who will make the final decision on whether the country should shift from weekly to daily petroleum price revisions.

The review comes at a time when global oil markets remain highly volatile due to escalating tensions in the Strait of Hormuz, a critical shipping route through which nearly one-fifth of the world’s oil supply passes. Any disruption in the region has the potential to trigger sharp swings in crude oil prices, affecting fuel-importing countries such as Pakistan.

Economic analysts, however, believe an immediate transition to daily pricing may not be practical. They argue that domestic fuel prices are influenced by several variables beyond international crude oil rates, including the rupee-dollar exchange rate, petroleum levy, customs duties, inland freight equalisation margins, and other applicable taxes.

Experts suggest that even if a daily pricing mechanism is introduced, the government may continue using an averaging formula to avoid passing abrupt price fluctuations directly to consumers. Such a system could help maintain market stability while ensuring fuel prices remain aligned with broader economic conditions.