The federal government has significantly increased petroleum prices across Pakistan, raising petrol and diesel rates by Rs55 per litre with immediate effect amid escalating geopolitical tensions in the Middle East that have severely disrupted global oil supply chains. The move marks the first in a likely series of price adjustments expected in the coming days as international crude prices surge to their highest levels in two years.
Petroleum Minister Ali Pervaiz Malik announced the revised prices in a recorded statement, accompanied by Deputy Prime Minister Ishaq Dar and Finance Minister Muhammad Aurangzeb. Following the increase, the price of petrol has been set at Rs321 per litre while high-speed diesel now stands at Rs336 per litre. The government has also raised the price of kerosene oil by Rs130 per litre to Rs319 and increased the rate of light diesel oil by Rs68, bringing it to Rs235 per litre.
The price revision comes as global energy markets react sharply to the intensifying conflict involving the United States, Israel and Iran. Regional tensions escalated dramatically after recent air strikes by the United States and Israel reportedly killed Iran’s Supreme Leader Ayatollah Ali Khamenei along with several senior officials. Iran responded with retaliatory attacks targeting US military bases in multiple Gulf countries, broadening the conflict across the region.
In a major escalation, Iran also closed the Strait of Hormuz, one of the world’s most critical energy transit routes. The closure has halted or severely restricted oil shipments through the waterway, disrupting supply flows to numerous countries that rely on crude transported through the corridor. As a result, crude oil prices surged sharply during the week, marking the strongest weekly gains since the extreme market volatility witnessed during the early months of the COVID-19 pandemic in 2020.
According to the petroleum ministry, the average Platts price for petrol climbed from $78 per barrel to nearly $107 within six days, representing an increase of around 37 percent. Diesel prices experienced an even steeper jump, rising from $88 to $150 per barrel, reflecting a surge of roughly 70 percent during the same period.
Pakistan, which relies heavily on imported fuel to meet its energy needs, is directly exposed to fluctuations in global oil markets. Officials said the government had little choice but to adjust domestic prices to reflect international trends while ensuring continued fuel availability within the country. Brent crude oil prices crossed $92 per barrel on Friday, reaching the highest level recorded in two years.
While the price adjustment aligns with rising global costs, the increase in petrol prices exceeded the corresponding rise in international markets because the government raised the petroleum levy on petrol to a record Rs105.4 per litre. At the same time, the levy on diesel was reduced to Rs55 per litre to provide partial relief to sectors that rely heavily on diesel consumption, particularly agriculture and public transportation.
Officials indicated that the strategy effectively shifts a greater portion of the burden onto petrol users, including motorcyclists and private vehicle owners, in order to subsidize diesel usage across essential sectors of the economy.
This marks the second increase in fuel prices within less than a week, and authorities have signaled that another adjustment may occur around March 15 depending on international price movements. Global oil markets have already surged nearly 30 percent over the past week as the regional conflict forced the closure of several oil and gas facilities and disrupted shipments through strategic maritime routes.
The government held multiple consultations before finalizing the decision. Sources said two main approaches were debated during a high-level meeting chaired by Prime Minister Shehbaz Sharif. One proposal suggested passing the entire international price impact to consumers in a single adjustment, which could also reduce demand for fuel. However, concerns were raised that a sudden spike would accelerate inflation, particularly affecting transportation costs for essential goods, food supply chains, and cargo movement.
Pakistan’s economic constraints further limited policy options. Under commitments made to the International Monetary Fund, the government must maintain fiscal discipline, while the Federal Board of Revenue continues to struggle with revenue shortfalls. These factors reduced the government’s ability to significantly cut petroleum levies to cushion the impact of rising global prices.
Finance Minister Muhammad Aurangzeb is leading a committee tasked with monitoring petroleum price developments during the ongoing crisis and advising the government on price adjustments and potential energy conservation measures. Proposals under consideration include reducing fuel allowances for government officials, implementing remote work arrangements for part of the public workforce, and other demand management strategies similar to those adopted during the pandemic.
Despite the rising prices, authorities said Pakistan currently holds sufficient petroleum reserves to meet domestic demand in the short term. However, officials acknowledge that the duration of the crisis remains uncertain. Petroleum Minister Malik noted that the global energy market is witnessing an unprecedented scramble for supplies and warned that the conflict could persist for weeks rather than days.
Given the evolving situation and continued volatility in international markets, the government has indicated that petroleum prices may continue to fluctuate in the coming weeks as it attempts to balance supply security with the economic burden on consumers.
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