Govt keeps fuel prices unchanged, raises levy to offset global oil price decline

ISLAMABAD: The government on Friday kept petrol and high-speed diesel (HSD) prices unchanged until further orders, depriving consumers of expected relief despite lower international crude oil prices, as the benefit was fully absorbed through a higher petroleum levy.

According to a notification issued by the Ministry of Energy's Petroleum Division, the price of petrol will remain unchanged at Rs299.50 per litre, while high-speed diesel (HSD) will continue to be sold at Rs311.47 per litre.

The decision comes despite an estimated 10 percent decline in global crude oil prices compared with the peak levels witnessed during the recent Iran-Israel conflict, when fears of supply disruptions pushed oil prices sharply higher.

Official pricing documents available with Pakistan Today/Profit show that the ex-refinery price of high-speed diesel (HSD) declined by about Rs6.57 per litre for the upcoming pricing cycle. However, the reduction was fully offset by an equal increase in the petroleum levy, leaving the final consumer price unchanged at Rs311.47 per litre.

Similarly, the pricing sheet shows that the ex-refinery price of petrol eased by 39 paisas per litre, while the petroleum levy increased by the same amount, neutralising any potential relief for consumers.

As a result, motorists, transporters, farmers, and industrial consumers, who had anticipated a reduction in fuel prices in line with international market trends, will receive no immediate benefit from lower crude oil prices.

Sources told Profit that the government has decided to maintain existing petroleum product prices instead of passing on the benefit to consumers.

According to the sources, the additional fiscal space created by lower international prices may be retained for 15 days or even up to a month, allowing oil marketing companies to adjust inventories purchased at higher costs before a fresh pricing assessment is undertaken.

The sources further indicated that the government is considering shifting from the existing fortnightly fuel price review mechanism to a monthly pricing system, arguing that the exceptional volatility created by the recent regional conflict has subsided and international oil markets have largely stabilised.

Industry sources said the latest pricing decision effectively channels the benefit of lower international oil prices into higher petroleum levy collections rather than reducing prices at the pump. The move is also expected to support government revenues amid continued fiscal pressures.

For consumers, however, the decision means transport costs, freight charges, and fuel expenses will remain unchanged despite the easing trend in global oil markets, delaying any trickle-down impact on inflation and household budgets.

Official price calculations show that the government absorbed the benefit of lower international oil prices by increasing the Petroleum Levy (PL) instead of reducing retail prices.

For high-speed diesel (HSD), the average Platts price, including incidentals and duty, fell by Rs6.57 per litre, reducing the ex-refinery price from Rs217.09 to Rs210.52 per litre. However, the government simultaneously increased the petroleum levy by Rs6.57 per litre, from Rs72.97 to Rs79.54 per litre, fully offsetting the reduction. Consequently, the subtotal remained unchanged at Rs294.96 per litre, while the maximum ex-depot price stayed at Rs311.47 per litre.

The HSD pricing sheet further shows that the Climate Support Levy (CSL) remained unchanged at Rs2.50 per litre, the IFEM margin was retained at Rs2.40 per litre, the oil marketing companies' distribution margin remained at Rs7.87 per litre, and the dealer margin stayed at Rs8.64 per litre. No Petroleum Development Charge (PDC) or sales tax was applied.

Similarly, for motor spirit (petrol), the average Platts price declined by 39 paisas per litre, bringing the ex-refinery price down from Rs211.37 to Rs210.98 per litre. The government raised the petroleum levy by the same amount, from Rs66.25 to Rs66.64 per litre, keeping the subtotal unchanged at Rs282.99 per litre and the retail price at Rs299.50 per litre.

The petrol pricing structure also remained unchanged in other components, with the Climate Support Levy continuing at Rs2.50 per litre, IFEM at Rs2.87 per litre, the distribution margin (including extra margin) at Rs7.87 per litre, and the dealer margin at Rs8.64 per litre. Like HSD, no Petroleum Development Charge or sales tax was imposed.