Daily fuel price adjustments and a deregulated petroleum market

Pakistan is gradually moving towards market-reflecting petroleum prices, a process that began in 2002. The Oil and Gas Regulatory Authority (Ogra) now sets retail prices for petrol and high-speed diesel (HSD) daily, based on a formula tied to a seven-day rolling average of Platts benchmark rates. However, this deregulation is limited, as Ogra still determines prices using government-set parameters.

The petroleum levy remains under state control for revenue generation, adjustable only with the finance ministry's approval. Diesel imports are restricted to PSO, the state-owned company. The inland freight equalisation margin (IFEM) retains centralised price equalisation, contrary to the spirit of deregulation. The deemed duty, a hidden tariff-protection charge, continues to distort competition between imported and domestic products.

The government claims this change aims to eliminate windfall gains and curb market abuse, allowing domestic prices to reflect international fluctuations instantly. However, genuine deregulation requires more than daily price revisions. The reform appears to be a crisis response rather than a significant reform, coming at a time when consumers are already fatigued by record pump prices.

There's also a transparency issue, as the levy record shows that savings from global price falls were absorbed through levy increases rather than passed on to consumers. The petroleum industry supports the move, but retail dealers argue that daily price changes are impractical for inventory management. Pakistan stands out in adjusting prices and overhauling the mechanism during a crisis, raising questions about the timing and approach of this reform.