Fuel price surge

EDITORIAL: The economic impact of the war in the Middle East was always destined to reach Pakistan sooner rather than later.

A surge in domestic energy prices had become inevitable once the US and Israel launched their strikes on Iran, and Tehran responded by attacking US bases in Gulf states, choking and endangering maritime activity around the Strait of Hormuz, the passageway for a fifth of global oil supplies.

In that context, the government’s decision over the weekend to introduce the steepest increase in petrol and high-speed diesel (HSD) prices in recent memory – raising them by Rs55 per litre – was unavoidable, even if the scale of the price jump and the move’s timing have drawn sharp criticism.

The ex-depot price of petrol rose from Rs266.17 to Rs321.17 per litre, while HSD climbed from Rs280.86 to Rs335.86 per litre for the coming week.

Such a steep adjustment will inevitably reverberate across the wider economy, as fuel costs sit at the centre of Pakistan’s inflationary dynamics, directly impacting transportation and logistics. Transport fares across the country have already increased by up to 20 percent, affecting goods carriers, intercity buses, railways and airlines alike.

Moreover, higher freight costs will also push up the prices of food and other essentials, strain an industrial sector already battling exorbitant costs of doing business and erode the purchasing power of households.

With international oil prices on an upward trajectory – brent crude having crossed the USD 100-per-barrel mark for the first time in four years – Pakistan may be confronting only the first of several painful energy price adjustments.

In that context, the government’s decision to raise petrol and HSD prices was broadly understandable. Critics, however, argue that the authorities may have acted prematurely as Pakistan reportedly had fuel stocks for 20-25 days, while the magnitude of the hike was also deemed too steep for a population already facing acute economic hardship.

The timing also invited scrutiny: the previous revision came on February 28, and with fuel prices normally adjusted fortnightly, the latest increase arrived just a week later, effectively handing oil marketing companies windfall gains on inventories purchased earlier at lower international prices.

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These criticisms, however, overlook the important fact that expectations of a dramatic price increase in the next pricing cycle had become widespread, creating powerful incentives for hoarding.

Reports had begun to surface of petrol pumps and distributors withholding supplies in anticipation of higher margins, while motorists, also expecting a steep hike, rushed to refill their tanks, leading to long queues at fuel stations just before the price rise announcement.

Faced with the risk of hoarding and panic buying spiraling into a full-blown crisis, the government’s move should be seen as a bid to stabilise expectations, maintain market availability and pre-empt a disorderly market response.

Even so, the current situation underscores deeper structural weaknesses in Pakistan’s energy supply chain. The country remains heavily dependent on the Middle East for its energy needs, leaving it highly vulnerable to the region’s recurring geopolitical shocks. It goes without saying that diversification of our energy sources should have been pursued long ago.

Saudi Arabia’s use of alternative shipping routes through the Red Sea may provide some breathing space, but Pakistan will still face significantly higher costs, particularly through higher freight costs and elevated insurance premiums on shipments.

So, while the government may have been justified in raising fuel prices, it cannot evade the responsibility of rethinking how Pakistan sources energy by diversifying suppliers beyond the Middle East, potentially towards Africa and North America. Also, measures encouraging lower fuel consumption, whether through remote work options or shorter work weeks deserve serious consideration.

Equally important is reducing the economy’s overwhelming dependence on diesel-powered road transport by investing in pipelines and more efficient freight systems. Without such reforms, each geopolitical tremor in distant waters will continue to translate into debilitating economic shocks at home.

Copyright Business Recorder, 2026