Pakistan Updates Petrol Refinery Pricing During Iran-US Tensions

The Federal Cabinet has revised the pricing mechanism for Motor Spirit (MS) petrol at refineries, effective immediately, amid ongoing tensions with Iran and the U.S. The decision was approved on October 30 and outlines a new formula for determining refinery prices.

The revised formula includes four components. The first determines the import price of petrol based on the actual import cost of the relevant shipment by Pakistan State Oil (PSO), or, if unavailable, the premium, incidentals, and customs duty from the last available cargo.

The second component sets the ex-refinery price for locally produced petrol, using pre-war pricing components for a 30-day period. Refineries will be paid based on levels effective as of March 7, 2026, according to government guidelines.

The third part addresses the difference between the import price and the refinery price. Refineries are required to surrender this differential to the government through the Petroleum Levy account, as outlined in the official notification.

The fourth part ensures that the financial benefit from the Petroleum Levy adjustment is passed on to consumers through a reduction in petrol prices. The government has directed that any savings from the levy adjustment be reflected in lower retail prices.

Refineries must comply with specific reporting and payment requirements, including daily reporting of domestic petrol sales and depositing the differential levy into the designated government account. The order was sent to several refineries, including Pak-Arab Refinery and National Refinery.

While the cabinet decision does not specify a fixed retail price reduction, the implementation on October 31 shows how the formula is applied in practice. The revised pricing reflects a lower Petroleum Levy component, reducing the levy charged in the retail price calculation, though the retail price itself remained unchanged.