Staff Report
ISLAMABAD:Petroleum product prices are projected to decline slightly from September 1, 2025, offering marginal relief to consumers, though official estimates do not account for exchange rate losses or gains that could alter the final outcome.
According to the latest calculations, the ex-depot sale price of petrol (motor gasoline) is expected to dip by Rs0.61 per litre, from Rs264.61 on August 16 to Rs264.00 per litre from September 1. High-speed diesel (HSD), the country’s most widely consumed fuel, is forecast to fall by Rs3.13 per litre to Rs269.86. Kerosene, largely used in rural households and for heating, is projected to decline by Rs1.57 to Rs176.70, while light diesel oil (LDO) is expected to fall by Rs2.61 to Rs159.55 per litre.
The ex-refinery price adjustments show a similar downward trajectory. Petrol is likely to drop by Rs0.43 per litre, diesel by Rs2.87, kerosene by Rs1.57 and light diesel oil by Rs2.61. These changes reflect global oil price movements, import premiums, and refining margins.
However, the estimates do not factor in foreign exchange losses, which are normally booked by oil marketing companies and passed on to consumers through price revisions. A note accompanying the projections clarified: “Exchange loss/gain not included.” This caveat leaves room for significant adjustments depending on the rupee-dollar exchange rate, which has remained volatile in recent weeks.
The projected relief comes against the backdrop of international crude oil benchmarks, where motor gasoline (PMG) premiums are calculated at $6.37 per barrel and HSD premiums at $3.20 per barrel. Domestic pricing also factors in Inland Freight Equalisation Margin (IFEM), which currently stands at Rs8.05 per litre for petrol and Rs6.20 per litre for diesel, alongside Petroleum Levy (PL) and Customs Surcharge (CSL). As of mid-August, PL and CSL combined are set at Rs80.52 per litre for petrol and Rs79.51 for diesel.
In percentage terms, the projected reduction is modest: petrol may decline by 0.2 percent, diesel by 1.1 percent, kerosene by 0.9 percent and light diesel oil by 1.6 percent. The smaller drop in petrol compared to diesel reflects differing international pricing trends and import costs.
Petroleum pricing has been politically sensitive in Pakistan, with even minor adjustments sparking public debate due to their knock-on effects on inflation. Diesel, in particular, drives transport and agriculture costs, making its reduction critical for moderating food price pressures. Petrol price cuts directly impact urban households and private transport users, while kerosene remains vital in rural energy mixes.
The Ministry of Finance typically announces final fortnightly adjustments in fuel prices after reviewing summaries prepared by the Oil and Gas Regulatory Authority (Ogra). With one trading day of international Platts benchmarks still remaining before the cut-off, the estimates could change slightly. The omission of exchange rate adjustments also means that a depreciation of the rupee against the dollar could wipe out the projected relief, or conversely, an appreciation could enlarge it.
In recent years, the government has relied heavily on petroleum levy collections to bolster non-tax revenues. The levy on petrol and diesel has been raised progressively, often offsetting declines in global crude prices. For fiscal year 2025-26, the government has budgeted a record petroleum levy target of over Rs1.3 trillion, making fuel taxation a cornerstone of revenue mobilisation. This limits the extent of consumer relief when international prices fall, as levies tend to be adjusted upward to protect fiscal space.
Historically, Pakistan’s fuel pricing adjustments have tracked international trends with a lag, but fluctuations in exchange rates often magnify consumer impact. For instance, in 2022 and 2023, steep rupee devaluations nullified potential relief from lower global oil prices, pushing domestic fuel rates to record highs. Current projections assume a stable exchange rate, leaving the actual consumer price change uncertain.
Industry insiders note that while global oil prices have eased somewhat in recent weeks, premiums on refined products remain elevated, reflecting shipping costs and supply risks. Regional demand dynamics, particularly from South Asia and East Asia, continue to exert pressure on product markets.
For consumers, even a minor reduction will be welcome relief amid high inflation. The Consumer Price Index (CPI) has remained in double digits for much of 2025, with fuel a key driver of household costs. Transport fares, food logistics and electricity generation costs are directly linked to diesel pricing, meaning any reduction in diesel can ripple through the wider economy.
Analysts caution, however, that the projected cuts are modest and temporary. “Fuel prices remain hostage to both international oil markets and domestic exchange rate movements,” one energy expert observed. “Unless Pakistan diversifies its energy mix and strengthens its currency, consumers will continue to face volatility.”
The government’s final decision on September 1 will be closely watched by both households and businesses. While the Rs0.61 to Rs3.13 per litre cuts projected today suggest a downward trend, the impact of exchange rate adjustments and last-minute international price movements will determine whether the relief holds or is neutralised in the official notification.
In the meantime, the data underscores Pakistan’s vulnerability to external shocks in fuel pricing and the delicate balance policymakers must strike between consumer relief and revenue needs. Whether the modest September relief materialises as projected will depend less on refinery margins and more on the stability of the rupee in the days ahead.
