The government’s decision to introduce daily petroleum price adjustments is a welcome reform that could make fuel pricing in Pakistan more transparent, predictable, and responsive to international market conditions. Under the new mechanism, the Oil and Gas Regulatory Authority (Ogra) will revise prices daily using Platts benchmark rates and disclose the various components that determine the final retail price.

The reform comes at a time when global oil markets have become increasingly volatile because of geopolitical tensions and disruptions to energy supplies. In such an environment, a pricing system that relies on lengthy intervals between revisions can create sharp distortions. International prices may change significantly during the period between two domestic adjustments, leaving consumers, dealers, and the government exposed to sudden price shocks.

Daily adjustments offer a more flexible alternative. By allowing changes in global oil prices and exchange rates to be reflected more promptly in domestic prices, the new system can reduce the gap between international market conditions and what consumers pay at petrol stations. Instead of allowing price pressures to accumulate over several days or weeks before being passed on in a single large increase, smaller and more frequent adjustments can distribute the impact more gradually. This could help reduce the severity of sudden fuel price shocks.

The reform also has the potential to improve transparency. If Ogra publicly discloses the components used to calculate the daily price, consumers will have greater visibility into the factors determining the cost of petrol and diesel. International benchmark prices, exchange rate movements, taxes, margins, and other components can be assessed more clearly rather than being hidden within a complicated periodic pricing process. Transparency is particularly important in a sector that has traditionally been vulnerable to political intervention.

Under a system based on regular government announcements, authorities may face pressure to delay price increases for political reasons or postpone price reductions to protect fiscal revenues. While such decisions may offer short-term political or financial benefits, they can distort the market and create uncertainty for businesses and consumers. A more formula-based daily mechanism can reduce the scope for such discretion. When international prices and exchange rate movements are directly reflected in domestic prices, the government has less opportunity to delay or manipulate adjustments for political convenience.

The new system may also help discourage panic buying and hoarding. When consumers and market participants expect prices to be adjusted regularly, there is less incentive to rush to petrol stations before a large anticipated increase. Similarly, fuel retailers may have fewer opportunities to accumulate inventories at lower prices in anticipation of a sudden upward revision.

This issue is particularly important because the previous weekly or fortnightly pricing system created opportunities for speculative inventory gains. When global prices rose but domestic prices remained unchanged until the next scheduled revision, petrol pump owners could purchase or hold fuel at a lower price and benefit when the retail price was subsequently increased. The value of their existing inventory effectively rose because of the delay between international market movements and domestic price adjustments.

Consumers, meanwhile, ultimately faced the higher replacement cost. Daily price revisions can substantially reduce this gap. When domestic prices move more closely in line with international benchmarks, the opportunity to profit from predictable pricing delays becomes considerably smaller. The system can therefore improve market efficiency while reducing the possibility of windfall gains created by an opaque or delayed pricing mechanism.

India’s experience demonstrates that daily fuel price adjustments are not an untested concept. The country has revised petrol and diesel prices on a daily basis since June 2017. The system allows smaller and more frequent changes based on international oil prices and exchange rate movements rather than relying primarily on large periodic adjustments. Pakistan can draw useful lessons from that experience. The opposition of petrol pump owners should not be allowed to derail the reform. Their concerns deserve consideration, particularly where they relate to legitimate operating costs, cash-flow pressures, inventory management, and regulated profit margins.

However, policymakers must distinguish between genuine commercial concerns and profits generated primarily by an opaque pricing structure. In a properly functioning market, petrol pump owners should earn fair returns through regulated margins and efficient operations. If existing margins do not adequately cover legitimate business costs, they should be reviewed on the basis of actual expenses, investment requirements, and reasonable returns.

But allowing dealers to continue benefiting from predictable pricing gaps is not a sustainable solution. The government should also ensure that the transition to daily pricing is properly managed. Consumers must be provided with easily accessible information about price calculations, while Ogra should establish clear mechanisms for monitoring compliance and preventing manipulation at the retail level. Transparency will be essential to public acceptance. If consumers can clearly see why prices have changed on a particular day, they are more likely to understand fluctuations even when prices rise. Conversely, a system that merely changes prices daily without disclosing the underlying calculations could create new confusion rather than resolving existing concerns.

The reform should therefore be accompanied by regular publication of all price components and a clear explanation of how international benchmark rates and exchange rate movements are incorporated into the final price. The broader objective should be to establish a fuel market in which prices reflect economic realities rather than political timing. Pakistan’s previous system allowed price changes to accumulate, encouraged speculation, and created opportunities for political intervention. Daily adjustments cannot eliminate the impact of international oil price volatility, but they can make that impact more gradual, transparent, and predictable.

The government should remain open to addressing legitimate concerns raised by the petroleum industry. However, it should not reverse a reform simply because it disrupts a system that created benefits for some market participants at the expense of greater transparency and fairness for consumers. A modern petroleum pricing system should reward efficiency, not speculation. Petrol pump owners should earn through legitimate margins and effective operations, while consumers should not be forced to bear the cost of artificial pricing delays.

If implemented transparently and consistently, daily petroleum price adjustments could represent an important step towards a more efficient and accountable energy market in Pakistan. The success of the reform will ultimately depend on the credibility of the formula, the transparency of the data, and the government’s willingness to allow market conditions—not political convenience—to determine fuel prices.