Govt shifts to weekly oil price review amid Gulf supply tensions: report

The federal government has approved a proposal to review petroleum prices on a weekly basis in response to supply risks and rising import costs linked to tensions in the Gulf region, The Express Tribune reported, citing officials.

The Petroleum Division warned of potential disruptions in oil supplies due to regional tensions affecting shipping routes, prompting the government to adopt a new pricing mechanism to reduce financial risks for the oil industry.

Under the revised system, domestic fuel prices will be calculated using a five-day average of international benchmark prices from Monday to Friday based on the Gulf Arab Platts assessment.

The formula will also incorporate the weighted average premium of Pakistan State Oil (PSO) cargoes discharged or partially discharged with volumes available for sale in the following week. If no cargoes are available, the most recent weighted average premium will be used.

Officials said the new system would help narrow the gap between movements in international crude benchmarks and domestic price adjustments. It is also expected to reduce speculative hoarding and improve alignment between import costs and cash flows for oil marketing companies.

The pricing calculation will include the weighted average of PSO import-related charges and customs duties linked to the cargoes used in determining the premium.

The existing exchange rate adjustment mechanism based on PSO imports will continue. However, for high-speed diesel imports by other oil marketing companies, the weighted average exchange rate applied to PSO motor spirit imports will be used as the benchmark for calculating exchange losses.

Any exchange rate differentials for other oil marketing companies will be settled through the inland freight equalisation margin (IFEM). Companies that do not have cargoes in a given week may recover adjustments through the same mechanism.

Under the new process, the Oil and Gas Regulatory Authority (Ogra) will submit an indicative price calculation every Friday for review by the relevant committee. Following the committee’s decision, Ogra will finalise the prices based on the latest Platts assessments and updated PSO pricing data. 

Any change in the petroleum levy or climate support levy will be notified by the Petroleum Division on the advice of the Finance Division before the final price announcement.