Reflecting the first direct impact of the escalating conflict in the Middle East, the government has increased petrol and diesel prices by Rs55 ($0.20) per litre each. Global oil markets have been in turmoil since the United States and Israel began attacking Iran last week, raising fears of disruptions to key energy shipping routes and pushing petroleum prices sharply upward in international markets.
The price adjustment was announced at a joint press conference by Finance Minister Muhammad Aurangzeb, Deputy Prime Minister and Foreign Minister Ishaq Dar, and Petroleum Minister Ali Pervaiz Malik. The ministers said the government was closely monitoring international energy markets and domestic supply conditions amid the rapidly evolving Middle East crisis. However, Malik assured that once the situation stabilises, “we will revise the prices downward with the same speed and take steps to improve people’s income and purchasing power.”
Malik said Pakistan had entered the crisis with “comfortable energy reserves” due to earlier planning and supply management. Nevertheless, he explained that the sharp rise in global oil prices had forced the government to adjust domestic fuel rates to maintain supply continuity and avoid shortages. According to him, international petrol prices had climbed from roughly $78 per barrel on March 1 to around $106.8 per barrel, while diesel prices had risen to about $150 per barrel. Malik added that the government had attempted to minimise the burden on consumers, noting that diesel plays a critical role in agriculture, transportation and public mobility across the country. He also warned that authorities would take strict action against anyone attempting to hoard fuel or manipulate supply for profiteering.
Even so, the government’s decision to increase petrol and diesel prices by Rs55 per litre represents the sharpest single petroleum price adjustment in recent years, accompanied by even steeper increases in kerosene and light diesel oil. The move has taken much of the country by surprise. Despite official assurances that efforts were made to minimise the impact on the public, the burden will fall heavily on ordinary citizens already struggling with rising living costs and stagnant incomes. The steep increase in kerosene prices is particularly troubling, as it serves as a grim reminder that the poorest households disproportionately bear the heaviest burden of energy price shocks. Beyond household budgets, the consequences of this oil shock are likely to ripple across the broader economy.
Higher fuel prices inevitably increase transportation costs, which then cascade through the economy, affecting the prices of food, imports and exports, and industrial inputs. Pakistan Railways has already raised fares for economy and AC classes by 5% and 10%, respectively, reflecting the immediate impact of higher fuel costs. Economists have warned that the price hike will trigger a wider ripple effect, pushing up the cost of daily necessities such as fruits and vegetables due to higher freight and logistics charges.
This increase comes at a time when inflation has already begun creeping upward again. Even before the outbreak of the conflict, inflation had reached around 7%. The latest fuel price adjustment is therefore likely to accelerate that trend, placing additional pressure on low- and middle-income households whose budgets are already stretched thin by the rising cost of living.
The Rs55 jump has also triggered a wave of public criticism. On social media and in public discourse, many people have described the increase as a “petrol bomb,” questioning why austerity measures so often fall on ordinary citizens while the elite remain largely insulated. Critics have particularly highlighted the generous fuel allowances provided to government officials and senior bureaucrats. These allowances vary according to official grade and position. For instance, the Punjab government recently revised its Motor Transport Policy, under which the chief secretary and the inspector general of police are entitled to three vehicles each: one official vehicle of up to 2800cc, one touring vehicle of up to 4700cc, and one personal-use vehicle of up to 1800cc. The official and personal-use vehicles are entitled to 500 litres and 300 litres of petrol per month respectively, while the touring vehicle’s fuel consumption is covered on the basis of actual usage. Such generous entitlements, particularly at a time of economic hardship and fuel scarcity, appear increasingly difficult for the public to justify.
With global oil markets likely to experience continued volatility amid an expanding regional conflict, further price shocks cannot be ruled out in the coming weeks. Within just one week, crude prices have surged sharply, with Brent crude climbing by roughly a third to above $92 per barrel. Market expectations suggest that prices could even approach $150 per barrel if the conflict intensifies or drags on for an extended period.
The current crisis has once again exposed how vulnerable Pakistan’s economy is to geopolitical shocks. It also highlights deeper structural weaknesses in the country’s economic management and energy planning. For a country already struggling with a fragile external account, even modest increases in freight charges, insurance costs and the “war risk premiums” imposed by shipping companies can translate into significant financial pressure, rapidly draining the country’s already limited foreign exchange reserves. The combination of higher insurance costs, limited shipping availability and increased competition for cargoes in Asian markets could make it more difficult for Pakistan to secure energy supplies in the weeks ahead.
Pakistan’s heavy reliance on imported energy remains one of its most debilitating structural vulnerabilities. Nearly all of its petroleum requirements are met through imports, much of which passes through one of the world’s most sensitive maritime routes. Any disruption to shipping through the Strait of Hormuz — a corridor that carries roughly one-fifth of global oil supplies — has immediate consequences not only for fuel availability but also for prices in international energy markets.
In such circumstances, the government must urgently revive demand-management strategies similar to those adopted during the Covid-19 pandemic. Measures such as encouraging work-from-home arrangements, expanding distance learning options and promoting carpooling could help reduce fuel consumption and conserve precious foreign exchange. In a rapidly evolving and uncertain global environment, such steps are no longer optional but essential for economic resilience.