A Formula With a Secret
Every minister, adviser, and spokesperson will tell you the same thing: Pakistan’s petrol price is based on a rolling Platts/Oilgram average, an objective international benchmark, transparent, scientific, and beyond manipulation. It isn’t true.
Pakistan’s petrol pricing formula has a secret. Ministers won’t mention it. Spokespersons may not even know it. And Ogra’s weekly notifications are carefully designed to obscure it. The rolling Platts/Oilgram average, the objective international benchmark officials keep citing, is not what actually determines what you pay at the pump.
The Rs. 350 Billion Question
Every minister, adviser, and spokesperson will tell you petrol prices in Pakistan are set by an objective international benchmark, verifiable, beyond politics. They are telling you half the story. The other half costs the country Rs350 billion a year.
Here is the math: 123 million barrels are imported every year, at an average overpayment of $10 per barrel. Converted at today’s exchange rate, that comes to Rs350 billion. Every year. Gone.
Here is the whole truth: the primary input into Pakistan’s petrol pricing formula is not Platts. It is not an independent benchmark, and it is not a global average. It is a government-owned oil marketing company’s own declared import price. The Platts/Oilgram average only kicks in when the OMC’s price is unavailable, and that price is almost never unavailable.
The Referee Is Also the Player
The reality is stark. The OMC is Pakistan’s largest oil importer. Its declared purchase price is the primary input into the national petroleum pricing formula. It is a state-owned company whose profits flow directly to the government that sets the petroleum levy on top of that price. It just posted a 149 percent jump in profits.
The cold truth is that the referee is also the player, and the player is also the scorekeeper. That scorekeeper works for a government that collected Rs2.725 trillion in petroleum levy in just two years, more than the combined value of both IMF Rs. 2.725ogrammes. Next year’s target is Rs1.727 trillion. The year after, Rs1.915 trillion. By 2031, programs.llion.
An Extraction Machine, Not a Pricing Formula
This is not a pricing formula. It is an extraction machine. The OMC, whose declared purchase price feeds that formula, posted a profit of Rs38 billion, up from Rs15 billion the year before.
Think about what the 1.915 is. The OMC buys the oil. It declares what it paid. That 2.637 red price becomes the pump price. Its profits then flow to the government that sets the levy on top of that price. There is no independent check at any stage, no outside auditor, no verification of its declared import cost.
Working Exactly as Designed
The formula is not broken. It is working exactly as designed, for the oil compadesigned for government, for everyone except the 240 million people who pay for it.
The cost of this arrangement is Rs350 billion a year, roughly Rs10,000 out of every Pakistani family’s pocket, every year, for a formula that was never what officials said it was.
Here is the current arrangement, plainly stated. The OMC buys the oil. It declares the price. No one checks. No one audits. No one verifies. Ogra takes its word for it. The pump price follows. The oil companies pocket the difference: PSO Rs38 billion, Attock Petroleum Rs14 billion, PRL Rs10 billion, and NRL Rs7 billion. And every minister, adviser, and spokesperson goes on television and says the price is based on a transparent international formula.
