The fluctuation in petrol prices is a source of much debate in Pakistan. Yet, there seems to be a lot of misinformation surrounding how the price is determined and what factors most influence its frequent adjustment. To help make sense of it, this article will explore the pricing data from the past few years to comment on the pricing framework, recent trends, and what consumers can expect in the coming months.
Factors affecting the price of petrol
Regardless of where you are in the world, the price of petrol you pay at the filling station is an accumulation of several components, each signifying a segment of the overall oil value chain. From crude oil exploration and production, to refining and final product distribution; the cost of fuel must account for each sector of the industry. In addition, unless you live in an oil-rich country, the government will most likely implement fuel taxes as a source of revenue to meet fiscal targets or as a tool to drive energy policy.
Although the price makeup includes the factors highlighted above, the pricing framework may vary significantly from country to country. The government may completely regulate the price through subsidies or price caps, or have an entirely deregulated price structure driven by the market. In Pakistan, the petrol price is regulated by the government, and the price is notified through the Oil and Gas Regulatory Authority (OGRA) on a monthly or fortnightly basis.
Pricing framework
Essentially, the final price of petrol a consumer pays in Pakistan comprises of six components. The table below lists each component, its average percentage of the total price in the past four years, and what it means.
