Government Sets Target to Deregulate Petrol Prices by June 2027

Government Sets Target to Deregulate Petrol Prices by June 2027

ISLAMABAD: The federal government has announced an interim goal to full deregulation of petrol prices nationwide by June 2027.

In a meeting of the Petroleum Pricing Committee, major changes in the petroleum pricing mechanism were completed and a proposal was made to link the petroleum pricing formulas directly to the market.

The Diesel and New IFEM Framework will be protected.The Diesel and New IFEM Framework will be protected.
The meeting also agreed to develop strong regulations in case of extreme price fluctuations in the market of high-speed diesel to safeguard consumers from extreme price volatility.

In addition, the Petroleum Pricing Committee also approved a new Inland Freight Equalization Margin (IFEM) mechanism that will pave the way for the June 2027 deregulation target.

Committee Discussions and OGRA Authority
The pricing committee meeting was chaired by Minister for Petroleum Ali Pervaiz Malik. In principle, it was agreed to give powers to the Oil and Gas Regulatory Authority (OGRA) to switch from diesel pricing mechanisms that are tied to crude oil benchmarks without needing to seek approval from the federal cabinet when diesel crack spreads are extraordinary.

The committee has recommended possible criteria for intervention in situations of emergency in the context of the price of diesel, which specifies clearly the threshold parameters of the scenarios and the corrective measures to be implemented, the Petroleum Division said.

Phased Implementation and Consumer Impact
In the first phase of the plan, petrol prices will be completely deregulated, in line with the fact that high-octane fuels, such as 97 RON HOBC and 95 RON, are already fully deregulated. This will eventually move towards daily price changes when it reaches the 2027 deadline in June.

For consumers, the deregulation implies frequent pricing changes and possibly some price differences between the different Oil Marketing Companies (OMCs) competing in an open market. This may occasionally lead to lower costs, but the price-impact on consumers will be direct from oil market swings and exchange rate fluctuations.