By The South Asia Times

ISLAMABAD — In a move that has drawn sharp criticism from business groups and ordinary citizens alike, Pakistan introduced a daily petroleum pricing mechanism on July 21, abandoning its previous weekly revision system in favor of rates that now change almost as frequently as the weather.

The government's latest adjustment on July 28 saw petrol fall by just Re1 to Rs334.18 per litre, while high-speed diesel (HSD) jumped by Rs3.77 to Rs386.83 per litre.

The policy, approved by Prime Minister Shehbaz Sharif and the federal cabinet, transfers pricing authority to the Oil and Gas Regulatory Authority (OGRA), which now sets rates daily based on a seven-day average of international Platts benchmarks. The government argues the move enhances transparency and insulates the state from financial exposure. But for millions of Pakistanis already reeling from inflation, the daily price shuffle has become a source of profound economic anxiety.

The numbers tell a stark story. In just one week following the daily pricing system's launch, petrol surged by Rs28.71 per litre, while high-speed diesel skyrocketed by an astonishing Rs42.89 per litre. The cumulative increase pushed petrol to Rs335.18 per litre and diesel to Rs383.46 per litre by July 25 — levels not seen since the system's introduction. 

The government is currently charging Rs110 per litre in taxes and duties on petrol and Rs96 on diesel. Critics argue these levies amplify the pain of international price fluctuations.

The Pakistan Business Forum (PBF) has urged Prime Minister Sharif to scrap the daily pricing mechanism, warning that frequent fuel price changes are "disrupting business planning, fuelling inflation and increasing uncertainty across the economy".

In a letter to the prime minister, PBF President Khawaja Mehboob Ur Rehman said the policy has made it "difficult for industries, traders, transporters, exporters, manufacturers and retailers to estimate production costs, prepare quotations, fulfil contracts and plan commercial activities".

The forum argued that "daily fluctuations in fuel prices have encouraged retailers and transporters to raise prices of essential goods in anticipation of higher costs". It called on the government to "absorb part of the volatility, where fiscally possible, to support economic activity, protect businesses and cushion households from sharp increases in fuel prices".

The All Pakistan Dealers Association has also rejected the daily pricing decision and is considering protest plans.

Petrol powers private transport, rickshaws and two-wheelers, disproportionately affecting the middle and lower-middle classes. Diesel fuels heavy transport, power plants and agricultural machinery — meaning every price hike ripples through the entire economy, pushing up food and goods prices.

Economic experts warn that the increase in diesel prices "creates the possibility of increasing the cost of freight, which may lead to an increase in inflationary pressure in the future" . Reports already indicate that following the latest diesel price hike, essential commodities including flour, cooking oil, pulses, vegetables, sugar and milk have become more expensive.

- Global Context: Is Pakistan Alone?

Pakistan's daily fuel price mechanism is a global outlier. A review of international practices reveals that most countries — including India, Bangladesh, Sri Lanka, Türkiye and major Western economies — revise fuel prices on a weekly, fortnightly, or monthly basis to provide predictability for consumers and businesses.

Even in countries with volatile energy markets, governments typically absorb some price shocks rather than passing every international fluctuation directly to consumers. The PBF noted that "petrol prices in Pakistan were lower than those in Bangladesh, Sri Lanka and Türkiye" before the recent surge, suggesting affordability comparisons have now shifted dramatically.

Petroleum Minister Ali Pervaiz Malik has defended the daily pricing system, arguing that "sectors in which the government's role had been reduced had generally delivered better outcomes for consumers". He noted that "when prices rise internationally, they will be adjusted accordingly, and when they fall, the relief will be passed on immediately".

The minister also pointed out that the government has absorbed much of the international price impact on consumers' behalf, having allocated Rs130 billion toward petroleum subsidies so far.

The pricing turmoil comes against the backdrop of the US-Iran war that erupted on February 28, which led to the closure of the Strait of Hormuz — a vital route for global energy supplies. Fuel prices had already peaked at Rs458.41 per litre for petrol and Rs520.35 for diesel on April 3. While prices eased from those peaks, the new daily system has reintroduced volatility at a time when Pakistan's economy can least afford it.

Pakistan depends on the Gulf for nearly 70% of its oil supplies and spends approximately $20 billion annually on petroleum imports. Analysts estimate every $5 increase in global oil prices adds roughly $1 billion to the country's import bill.

The All Pakistan Petrol Tankers Association has announced plans to strike until their operational demands are met. Meanwhile, the PBF has called on the government to "restore a predictable, transparent and stable fuel pricing framework".

For millions of Pakistanis — from rickshaw drivers to farmers to factory workers — the daily fuel price gamble represents yet another burden in an already punishing economic climate. As one business leader put it, "The economy urgently requires confidence, stability and policy consistency, but the current pricing mechanism is creating uncertainty instead of supporting economic recovery"