By SKM
December 30, 2025
ISLAMABAD: Pakistanis could see one of the steepest fuel price cuts in months from January 1, 2026, as authorities have worked out a reduction of up to Rs10.60 per litre in petroleum prices for the next fortnight, driven by a sharp slide in international oil markets.
According to official estimates, petrol prices are expected to fall by Rs10.60 per litre, while high-speed diesel (HSD) may be reduced by Rs8.59 per litre. Kerosene oil is projected to become cheaper by Rs8.92 per litre, and light diesel oil (LDO) by Rs6.62 per litre, offering broad-based relief across transport, agriculture, and household fuel consumption.
If approved, petrol would retail at around Rs252.85 per litre, down from Rs263.45, while HSD is likely to settle at Rs257.06 compared to the current Rs265.65. Kerosene oil prices may decline to Rs171.62 from Rs180.54, and LDO to Rs146.64 from Rs153.26 per litre.
Why global oil prices are falling
Sources in the government and oil industry said the decline is being driven by a combination of supply expansion and weak demand in key markets. Crude output in the United States has risen sharply, while economic slowdown in China has dampened global demand. Adding to the supply glut, Kuwait’s refineries have resumed full-scale production after completing annual maintenance, flooding the market with refined products.
Taxes still dominate pump prices
Despite the sharp international price drop, consumers will continue to pay heavy taxes and levies, which make up a significant portion of retail fuel prices. Currently, the petroleum levy stands at Rs79.62 per litre on petrol and HOBC, Rs75.41 on HSD, Rs18.95 on kerosene, Rs15.37 on LDO, and Rs77 per litre on furnace oil. A Rs2.50 per litre carbon levy is also charged on petrol, HSD, and HOBC.
Margin hike to trim consumer gains
Part of the expected relief may be neutralised by higher margins for oil marketing companies and petroleum dealers. On December 9, 2025, the Economic Coordination Committee (ECC) approved an increase of Re0.61 per litre for OMCs and Re0.67 per litre for dealers on petrol and diesel.
The decision is awaiting federal cabinet approval and is expected to be notified at the beginning of the next fortnight. Once implemented, the margin hike will add a combined Rs1.28 per litre to petrol and diesel prices, reducing the net benefit for consumers.
Economic impact
Analysts say the fuel price cut could provide temporary relief to inflation, lower transport and logistics costs, and ease pressure on manufacturing and agriculture. However, they caution that high taxation on petroleum products continues to limit the full pass-through of global oil price declines to end consumers. Ends
