Govt May absorb oil price shock, Rs49 rise seen
Government plans to cushion up to Rs49 per litre increase in fuel prices through subsidies and price differential claims amid sharp global oil rally.
The Pakistan government is expected to absorb a sharp increase in oil prices of up to Rs49 per litre following a surge in global markets driven by rising tensions in the Gulf region.
Calculations indicate high-speed diesel prices have risen by Rs49 per litre, while petrol has increased by Rs29 per litre, intensifying pressure on the import-dependent economy.Officials said the government may offset the impact through price differential claims, shielding consumers from immediate price shocks.
The move comes as international oil markets witnessed a steep single-day rally, adding urgency to fiscal decisions on fuel pricing.Usama Qureshi, vice chairman of Cynergy Group, said global oil markets are accelerating rapidly with significant price spikes.
Dubai crude reached $166.6 per barrel, rising by over $11.20 in a single day. Diesel prices climbed to $218.79 per barrel, marking an increase of more than $25.71, while gasoline prices stood at $145.87 per barrel, up by $11.67.He said the rally is intensifying and creating mounting pressure on importing countries like Pakistan.
The surge reflects heightened geopolitical risks in the Gulf region, which remains a critical oil supply corridor for global markets.
Despite rising international prices, the government has opted to keep petrol and high-speed diesel prices unchanged for one week by providing a subsidy of Rs23 billion. This temporary relief covers the period from March 14 to March 20 and aims to stabilize domestic fuel rates amid volatility.
Read More: Govt Raises Petrol, Diesel Prices by Rs55
During the same period, the government raised the prices of kerosene oil and light diesel oil. The price of kerosene increased by Rs39.20 per litre to Rs358.01 per litre, while light diesel oil rose sharply by Rs67.51 per litre to Rs302.52 per litre from Rs235.01.The Ministry of Energy said the decision to freeze petrol and diesel prices was supported by maintaining existing petroleum levy rates. The levy on petrol remains at Rs105.37 per litre, while diesel carries a levy of Rs55.24 per litre.
Officials said the subsidy mechanism involves compensating oil marketing companies through price differential claims. Under this arrangement, the government will pay Rs49.63 per litre on petrol and Rs75.05 per litre on high-speed diesel to bridge the gap between market-driven costs and fixed retail prices.
The Oil and Gas Regulatory Authority will manage the disbursement of the Rs23 billion subsidy and implement verification and audit mechanisms for claims submitted by oil companies.
This process aims to ensure transparency and accuracy in payments linked to fluctuating international prices.The fiscal burden of the subsidy will be supported through a newly established Prime Minister’s Austerity Fund.
The Finance Division secured cabinet approval for the initiative, while the Economic Coordination Committee approved the transfer of Rs27.10 billion into the fund to finance such interventions..