Pakistan considers big fuel price cut

Petrol, diesel prices may plunge by over Rs55 per litre

ISLAMABAD:

As international oil prices lose steam amid easing tensions in the Middle East, the government is weighing what could be one of the biggest reductions in petroleum prices in recent years, with petrol and diesel rates expected to fall by more than Rs55 per litre.

Working papers prepared by the Petroleum Division, Pakistan State Oil (PSO) and the Oil and Gas Regulatory Authority (Ogra) are being examined as officials work on a significant downward revision in domestic fuel prices.

Sources said Prime Minister Shehbaz Sharif has specifically instructed Petroleum Minister Ali Pervaiz Malik to explore ways to offset the fuel price increase announced on March 7.

According to officials familiar with the discussions, the prime minister was dissatisfied with the scale of the earlier increase and has since pushed for meaningful relief for consumers.

The government is now examining options for a reduction that could exceed the Rs55-per-litre increase imposed in March.

The move has been made possible by a sharp decline in international crude prices. Officials noted that Arab Light crude, the benchmark used for determining petroleum product prices in Pakistan, has fallen by around $16 per barrel over the past week, slipping to nearly $80 per barrel.

The anticipated reduction has sparked considerable activity within the oil sector. Sources said some oil marketing companies have begun lobbying against a one-time cut of more than Rs55 per litre and are instead advocating a phased reduction spread over multiple pricing reviews.

However, officials maintain that the government is assessing the extent to which the entire benefit of lower international prices can be passed on directly to consumers.

Global oil markets continued their downward trajectory on Thursday as crude prices fell by more than $1 per barrel after the United States and Iran reportedly signed an interim agreement aimed at ending hostilities, reopening the Strait of Hormuz and easing US sanctions on Iranian oil exports.

The development significantly improved expectations regarding global oil supplies.

Petroleum Minister Ali Pervaiz Malik said on Thursday that Prime Minister Shehbaz Sharif had directed authorities to ensure that the gains from declining global oil prices were transferred to the public without delay.

In a social media post on Thursday, the petroleum minister said: "International oil prices are falling, and the prime minister has directed that this benefit be passed on to the public immediately".

He also announced that the government had decided to bring greater transparency to fuel pricing by introducing a new mechanism.

"The minister said that 'a high-level committee had been constituted to devise a transparent weekly fuel pricing mechanism … so that in the future, whenever needed, the public can understand the reasons for changes in prices.'"

According to Malik, the exercise would be carried out "in full consultation with all stakeholders".