Government Approves Weekly Petroleum Price Review Mechanism

The federal government has approved a proposal to shift to a weekly review of petroleum prices in response to potential supply disruptions and increasing import costs linked to escalating tensions in the Gulf region, according to officials.

The Petroleum Division cautioned that regional instability could affect key shipping routes and disrupt oil supply chains, prompting authorities to introduce a revised pricing mechanism aimed at reducing financial exposure for the oil sector.

Under the updated framework, domestic fuel prices will be determined using a five-day average of international benchmark prices from Monday through Friday based on the S&P Global Platts Gulf Arab assessment.

The calculation will also factor in the weighted average premium of cargoes imported by Pakistan State Oil (PSO) that have been discharged or partially discharged, with volumes available for sale during the following week. In cases where no cargoes are available, the most recently determined weighted average premium will be applied.

Officials stated that the revised approach is intended to narrow the gap between international crude price fluctuations and domestic price adjustments. The mechanism is also expected to discourage speculative stockpiling and improve the alignment between import expenses and cash flows for oil marketing companies.

The pricing formula will additionally include the weighted average of PSO’s import-related charges and customs duties associated with the cargoes used in calculating the premium.

The current exchange rate adjustment system tied to PSO imports will remain in place. However, for high-speed diesel imports by other oil marketing companies, the weighted average exchange rate applied to PSO motor spirit imports will serve as the benchmark for determining exchange losses.

Any exchange rate differences affecting other oil marketing companies will be settled through the inland freight equalisation margin (IFEM). Firms without cargoes during a particular week may recover related adjustments through the same mechanism.

Under the revised procedure, the Oil and Gas Regulatory Authority (Ogra) will submit an indicative price calculation each Friday for review by the relevant committee. After the committee’s assessment, Ogra will finalize the prices using the latest Platts benchmark data along with updated PSO import pricing details.

Any revisions in the petroleum levy or the climate support levy will be notified by the Petroleum Division on the recommendation of the Finance Division of Pakistan prior to the official announcement of the final fuel prices.