ISLAMABAD – The federal government has changed how petrol prices are determined, amid volatility caused by the Iran-US war. The new mechanism covers both imported and locally refined petrol.
The federal cabinet approved the revised formula on October 30, according to Petroleum Division documents seen by Geo News. The changes apply only to Motor Spirit (MS), or petrol. Pricing parameters for all other petroleum products stay as they are.
New import pricing
Under the revised formula, the import price of petrol will be based on the actual import cost of the relevant Pakistan State Oil (PSO) cargo. If that cost is not available for daily pricing, the premium, incidentals and customs duty from the last available cargo will be used instead.
This replaces the mechanism introduced earlier this year, which set petrol prices using PSO import data and various averaging arrangements.
Refinery prices frozen for 30 days
The government has also introduced a temporary arrangement for local refineries, valid for the next 30 days. During this period, the premium, incidentals and customs duty used to calculate the ex-refinery price will be fixed at their March 7, 2026 levels, before the Iran-US war began.
Energy Ministry sources said refineries kept charging premiums equal to those on imported petrol after the war broke out. Freezing these components at the March 7 levels will bring the ex-refinery price below the import price.
Refineries will pay the difference between the two prices into the petroleum levy account. They must also report their daily domestic petrol sales and submit deposit records to the Petroleum Division and Ogra for verification and reconciliation. According to the documents, the benefit will be passed on to consumers through a matching reduction in the petrol price.
Rs80 levy unchanged
Energy Ministry sources clarified that the existing petroleum levy of Rs80 per litre will not change and has no link to the relief from the new mechanism. The new arrangement only concerns the gap between the higher import price and the temporarily lower ex-refinery price, with refineries depositing an equivalent amount under the levy account.
Short-term smoothing of price swings
The documents also describe a separate short-term adjustment to smooth petrol price movements. The Petroleum Division said the petrol premium was $19.880 per barrel between October 17 and 27, against a calendar-year-to-date premium of $12.998 per barrel, a gap of $6.882 per barrel. The benefit from this gap has been built into petrol prices at $2.950 per barrel per day to keep prices stable.
The latest changes come months after the government introduced a daily fuel pricing framework, under which Ogra calculates and publishes ex-depot prices of petroleum products.
