Why Do Petrol Prices Change in Pakistan?
The Government of Pakistan revises petroleum prices on a fortnightly basis (every 15 days). The final price at the pump is determined by the Oil and Gas Regulatory Authority (OGRA) and approved by the Prime Minister. Key factors influencing the rate include:
- Global Crude Oil Prices: Since Pakistan imports the majority of its oil, fluctuations in the international market (Brent Crude) directly impact local rates.
- Exchange Rate (USD to PKR): Oil is purchased in US Dollars. A depreciation of the Pakistani Rupee makes imports more expensive.
- Petroleum Levy (PL): A tax imposed by the federal government to generate revenue.
- Inland Freight Equalization Margin (IFEM): This ensures uniform prices across the country by adjusting transportation costs.
Breaking Down the Fuel Price
The price you pay per liter is a sum of several components, not just the cost of crude oil. Here’s a simplified breakdown:
- Base Price (Ex-Refinery): The foundational cost of fuel after refining. This is the largest component, directly tied to international crude oil prices.
- Dealer Commission & OMC Margin: A fixed amount per liter allocated to the petrol pump owners and the Oil Marketing Companies (like PSO, Shell) for their expenses and profit.
- Petroleum Levy (PL): A significant federal tax levied per liter. The government frequently adjusts this to manage revenue or provide public relief.
- General Sales Tax (GST): A percentage-based tax applied to the fuel's base price, which can cause costs to rise further when global oil is expensive.
Difference Between Petrol and High-Speed Diesel
Petrol (Motor Gasoline): Primarily used in cars, motorcycles, and small generators. It is a lighter fuel.
High-Speed Diesel (HSD): Used in heavy transport vehicles, buses, trucks, trains, and agricultural machinery. HSD prices significantly impact inflation as they affect the cost of transporting goods.