Daily fuel shocks: Stop making Pakistan’s people hostage to oil price volatility

Pakistan’s continuing increases in petroleum prices have become an unbearable burden on ordinary citizens and raise serious questions about the wisdom and fairness of the government’s daily fuel-pricing mechanism. At a time when households are already struggling with inflation, high electricity and gas bills, transport costs and declining purchasing power, almost daily changes in petrol and diesel prices are injecting further uncertainty into every sector of the economy.
There is no denying that international oil markets have witnessed considerable volatility. Pakistan, being heavily dependent on imported energy, cannot remain insulated from movements in global petroleum prices. When international crude and refined-product prices rise substantially, some impact on Pakistan’s import bill and ultimately on domestic consumers is inevitable.
But international prices do not move in only one direction.
This is where the government’s pricing policy deserves much closer scrutiny. During the recent period, international crude prices declined on more than one trading day. Brent crude fell on September 11 and recorded another sharp decline on September 16. Yet Pakistani consumers continued to face upward revisions in domestic petroleum prices during this broader period of international volatility.
This raises a simple but fundamental question: if increases in international prices are transmitted rapidly to Pakistani consumers, why are decreases not reflected with equal speed and transparency?
A mechanism that appears to pass every adverse international movement to consumers while failing to visibly transmit favourable movements is extremely harsh and difficult to justify to a population already under severe economic pressure. The government must explain exactly how its formula works instead of merely citing international market conditions whenever prices are increased.
There is an even more fundamental issue. The petroleum being sold at Pakistani filling stations today was not necessarily purchased from the international market today. Pakistan does not purchase, import, transport, refine and distribute the same petroleum consignment within 24 hours. There is an unavoidable time lag between procurement in the international market and eventual sale to consumers.
Why, then, should an ordinary Pakistani be made hostage to daily international fluctuations?
A more rational approach would be to determine petroleum prices on a monthly basis, using the actual landed cost of imports, exchange rates, freight, premiums and an appropriate average cost of petroleum stocks and purchases. If petroleum purchased over preceding weeks is being consumed today, its actual procurement cost should be an important component of the retail-price calculation.
Transparency is equally essential. With every price revision, the government should disclose the relevant international reference price, actual procurement cost, exchange-rate impact, freight, dealer and marketing margins, petroleum levy, taxes and other charges. The public has a right to know precisely how every rupee in the price of a litre of petrol or diesel has been calculated.
The burden of petroleum levies also deserves urgent review. When international prices surge, the government should consider reducing levies and other fiscal charges instead of automatically transferring the maximum possible burden to consumers. Government revenue is important, but so are the survival of households, competitiveness of businesses and stability of the national economy.
Fuel prices have a multiplier effect. Diesel increases raise the cost of agriculture, freight and public transport. Petrol increases affect millions of commuters and small businesses. Higher transportation costs eventually find their way into the prices of food, medicines and other necessities. Daily fuel-price uncertainty therefore becomes daily economic uncertainty.
There must also be an end to unnecessary government-funded fuel privileges. Ministers, political office-holders and senior officials should not enjoy excessive free petrol and fuel allowances while ordinary citizens are being asked to make sacrifices. If the nation is facing an energy and fiscal crisis, austerity must begin with those governing the country.
Parliament, regulators, auditors and other constitutionally competent oversight institutions should closely scrutinise the pricing mechanism. Any allegations of manipulation, profiteering, corruption or irregularities should be investigated transparently and on evidence. Public confidence cannot be restored through assurances alone; it requires disclosure and accountability.
Pakistan needs a petroleum policy based on fairness, predictability and actual costs-not one that makes consumers anxious about what price they will find at the pump tomorrow.
The daily pricing experiment should therefore be urgently reviewed. Petroleum prices should preferably be fixed for a reasonable period, such as one month, on the basis of transparent procurement and inventory costs. Levies should be rationalised, official fuel privileges curtailed and both international increases and decreases passed through fairly.
Pakistanis cannot control wars, shipping disruptions or global oil markets. But they have every right to demand that their government does not make them prisoners of every daily fluctuation. When international prices rise, the nation is asked to pay. When they fall, the nation deserves to see the benefit as well. Anything less will deepen the perception that petroleum pricing has become a means of extracting revenue from an already overburdened public rather than protecting the national interest.