Govt weighs fuel price cut of over Rs55 per litre

ISLAMABAD: The federal government is considering what could become one of the largest cuts in petroleum prices in recent years after a sharp drop in international crude oil rates, with petrol and diesel prices expected to decline by more than Rs55 per litre.

Working papers prepared by the Petroleum Division, Pakistan State Oil and the Oil and Gas Regulatory Authority are under review as officials examine a major downward revision in domestic fuel prices. Prime Minister Shehbaz Sharif has asked Petroleum Minister Ali Pervaiz Malik to explore options to neutralise the fuel price increase announced on March 7. Officials familiar with the discussions said the prime minister was unhappy with the scale of that earlier increase and has since pressed for substantial relief for consumers.

The government is now assessing whether the reduction can exceed the Rs55-per-litre increase imposed in March. Officials said the room for a cut has emerged because of a steep fall in global crude prices. They said Arab Light crude, which is used as the benchmark for setting petroleum product prices in Pakistan, has dropped by around $16 per barrel over the past week to nearly $80 per barrel.

Oil sector activity and pricing review

The expected reduction has triggered movement across the oil sector. Some oil marketing companies have started lobbying against implementing a cut of more than Rs55 per litre in one go and are instead seeking a phased reduction over several pricing reviews. Officials, however, are examining how much of the benefit from lower international prices can be passed on directly to consumers.

Global oil markets extended their decline on Thursday, with crude falling by more than $1 per barrel after reports that the United States and Iran had signed an interim agreement aimed at ending hostilities, reopening the Strait of Hormuz and easing US sanctions on Iranian oil exports. The development improved expectations for global oil supply.

Minister says relief should reach public

Petroleum Minister Ali Pervaiz Malik said on Thursday that the prime minister had directed authorities to transfer the benefit of falling international oil prices to the public without delay. In a social media post, Malik said:

"International oil prices are falling, and the prime minister has directed that this benefit be passed on to the public immediately"

The minister also said the government had decided to introduce a new mechanism to make fuel pricing more transparent.

According to Malik, the process would be carried out in full consultation with all stakeholders.