The federal government is likely to miss its revised petroleum levy (PL) collection target of Rs 1,161 billion for fiscal year 2024-25, due primarily to rising international oil prices triggered by Israel’s recent military strikes on Iran. Market volatility following the geopolitical escalation has disrupted pricing and fiscal projections.
Shortly after the Israeli assault on Iranian soil, global crude prices jumped—petrol rose by $1.98 per barrel, reaching $73.79, while high-speed diesel (HSD) surged by $2.54 to $78.68 per barrel. This surge is expected to translate into domestic retail price hikes: petrol may increase by Rs 4.38 per litre and HSD by Rs 5.02 per litre from June 16, 2025.
Premiums on petrol climbed from $77.19 to $79.35 per barrel, a $2.16 jump, while HSD premiums remained unchanged at $3.25 per barrel. Concurrently, customs duties on HSD and petrol are projected to rise slightly—from Rs 14.20 to Rs 14.56 and Rs 13.70 to Rs 14.10 per litre, respectively. The rupee-dollar exchange rate has also inched up marginally, from Rs 282.20 to Rs 282.49 per dollar.
These calculations exclude anticipated adjustments by Pakistan State Oil (PSO), which, if implemented, could push prices further. The Energy Ministry is also seeking the federal cabinet’s approval to align fuel levies with International Monetary Fund (IMF) requirements, adding pressure on pricing policy.
The government had initially targeted Rs 1,281 billion in PL revenue for FY25 but revised it downward to Rs 1,161 billion. However, with only Rs 834 billion collected in the first nine months (July–March), representing just 71% of the revised goal, a shortfall seems inevitable. Analysts warn that further price increases may suppress demand, compounding the gap in next year’s target of Rs 1.4 trillion.
To compensate, the government, through an ordinance issued on March 16, 2025, removed the Rs 60-per-litre cap on the PL. This allowed an additional collection of Rs 18.02 per litre on petrol and Rs 17 on HSD. An Oil and Gas Regulatory Authority (OGRA) official, speaking anonymously, estimated this could yield Rs 90 billion quarterly and Rs 300 billion annually—provided consumption levels remain stable.
Despite inflationary pressures, Oil Marketing Companies (OMCs) showed resilience. In May 2025, they posted a 10% year-on-year sales growth, with volumes reaching 1.53 million tons—a 5% month-on-month rise. This uptick offers the government a temporary cushion but may be short-lived if prices continue their upward trend.
Looking ahead, OGRA will review oil prices, currency exchange data, and global trends from the last 15 days to determine the next pricing cycle. The Finance Division is set to officially announce new prices on June 15, 2025.
The evolving geopolitical crisis and domestic fiscal pressures underscore the vulnerability of Pakistan’s energy economy to global shocks. With IMF conditionalities tightening and oil prices surging, the government’s ability to meet revenue targets without hurting consumers hangs in the balance.
