Why doesn’t every drop in Global Oil Prices reach Pakistani Petrol Pumps? Explained

Pakistan is anticipating significant cuts in petrol and diesel prices, potentially up to Rs20 and Rs35 per litre respectively, following a recent dip in global oil markets. This expected reduction is largely due to a breakthrough peace agreement between the United States and Iran, which caused a dramatic collapse in international oil prices by removing a 'war premium'. However, the full benefits may not reach consumers immediately because Pakistan's fuel pricing formula includes import premiums, freight costs, taxes, government levies, dealer commissions, and oil company margins. Pakistan, heavily dependent on imported fuel and relying on Gulf-region refined fuel benchmarks, is hopeful for one of the largest fuel price reductions in recent years, with the ex-refinery price of petrol already dropping.