What really drives fuel prices in Pakistan

March 07, 2026 (MLN): Fuel prices in Pakistan are determined based on the average Platts benchmark prices of petrol and diesel during the pricing period, along with exchange rate adjustments not the cost of a specific shipment purchased weeks earlier.

Oil companies are also legally required by the Oil & Gas Regulatory Authority (OGRA) to maintain roughly 20 days of mandatory stock, which has recently been increased due to regional tensions.

This system means that when fuel is sold, it must be replenished at current international prices, making the idea of “inventory profits” misleading.

Khurram Schehzad highlighted this point in a recent post on X, explaining that any perceived gains from holding inventory are often offset when companies replenish stock at higher current prices.

He added that when international prices fall, companies can incur significant losses by selling previously purchased higher-cost fuel at lower regulated rates a situation observed multiple times in 2022, 2023, and even last December, when petrol prices were cut by about Rs24 per litre.

His insights clarify that Pakistan’s pass-through pricing system with mandatory inventory requirements does not create guaranteed windfall profits and can frequently lead to inventory losses for oil companies.

The recent overnight increase of Rs55 per litre in petrol and HSD bringing petrol to Rs321.17 and diesel to Rs335.86 illustrates how international price surges directly influence domestic fuel rates under this system.

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