Pakistan Revises Petrol Pricing Formula Amid Regional Tensions

The federal government has revised Pakistan’s petrol pricing mechanism amid volatility linked to Iran-US tensions, directing domestic oil refineries to implement a temporary formula approved by the cabinet. The arrangement is intended to limit the impact of higher international costs on consumers while maintaining daily fuel-price calculations.

Under the revised mechanism, the import price of motor spirit will be determined using the actual cost of the relevant petrol cargo imported by Pakistan State Oil. When the final cost of a cargo is unavailable at the time of daily price calculation, the premium, incidental expenses and customs duty applied to the most recently available shipment will be used instead.

For the next 30 days, refineries will calculate their ex-refinery petrol prices by fixing the premium, incidental expenses and customs duty at the levels prevailing on March 7, 2026, before the latest regional conflict disrupted energy markets. The temporary benchmark is designed to separate some war-related costs from the price paid to domestic refiners.

Any difference between the import price calculated from the PSO cargo and the regulated ex-refinery price must be surrendered by refineries under the federal petroleum levy account. The government has directed that the resulting financial benefit be transferred exclusively to petrol consumers through a corresponding reduction in the levy applied to motor spirit.

The Petroleum Division has sent implementation instructions to the country’s refineries. Companies must deposit the differential levy in accordance with notifications issued by the Oil and Gas Regulatory Authority and provide daily reports covering domestic petrol sales, payment receipts and challans for official verification and reconciliation.

The revised formula follows Pakistan’s transition towards a daily petroleum pricing regime intended to make retail prices more responsive to movements in international markets. The new intervention, however, temporarily limits how much of the increase in import-related costs can be reflected in refinery prices during a period of exceptional regional volatility.

Refinery representatives have warned that fixing parts of the ex-refinery calculation at pre-conflict levels could impose a substantial financial burden on domestic operators. Industry estimates suggest the adjustment could create a difference of around Rs49 per litre on locally refined petrol, although the actual impact will depend on daily import costs, levy adjustments and notified prices.

The refining sector has also raised concerns that prolonged pricing interventions could affect cash flows and planned investments in major refinery-upgradation projects. These projects are intended to improve fuel quality, increase domestic production efficiency and reduce Pakistan’s dependence on imported petroleum products over time.

For consumers, the immediate effect will depend on how much of the price differential is offset through the petroleum levy in each daily notification. The mechanism does not permanently shield petrol prices from international increases, but it provides the government with a temporary method to moderate sharp movements during the initial 30-day period.

The Petroleum Division and OGRA will monitor refinery deposits, domestic sales and price calculations throughout the arrangement. Further changes may be required if regional tensions persist, import costs rise sharply or the temporary formula creates sustainability concerns for domestic refineries.