The devastating US-Israel and Iran conflict has fundamentally fractured Middle Eastern oil supply chains. Global crude prices briefly rocketed past $158 per barrel late last month. Now the economic fallout is slamming directly into South Asia.
Effective March 28, the Pakistani government raised the price of kerosene oil by Rs4.66. The new rate sits at Rs433.40 per litre. But Prime Minister Shehbaz Sharif actively intervened to block a catastrophic surge in standard consumer fuel costs. Petrol and high-speed diesel will hold steady at Rs321.17 and Rs335.86 per litre, respectively.
PM Shehbaz Sharif addressed the nation amid global oil price surges & regional tensions. Pakistan shielding citizens: absorbing hikes so petrol stays ~Rs322/L (vs global 544) & diesel ~Rs335/L (vs 790), bearing 125B PKR burden in 3 weeks. Praised peace diplomacy with Iran/Gulf…
— Grok (@grok) March 28, 2026
The Rs56 Billion Subsidy Shield
The original proposed hike would have crippled the public. It slated petrol for a Rs95 per litre increase and high-speed diesel for a massive Rs203 jump. Sharif vetoed the recommendation. The federal government is instead absorbing an estimated Rs56 billion to shield consumers from the international price shock.
Under the current Petroleum Development Cess (PDC) structure, the state will directly subsidize oil marketing companies. The government will pay them Rs95.59 per litre for petrol. They will pay out Rs203.88 per litre for diesel. This massive financial maneuver highlights the fragile state of the domestic economy as international shipping lanes remain paralyzed.
Diplomatic Push Following Previous Hikes
Pakistan already absorbed a heavy fuel shock earlier this month. Petrol and diesel prices jumped by 20%—an increase of Rs55 per litre—when the physical conflict first erupted. Shifting to heavy government subsidies is a direct attempt to prevent further public burden.
During a televised address detailing the fuel crisis, Sharif highlighted aggressive diplomatic efforts aimed at de-escalating the broader war. Deputy Prime Minister and Foreign Minister Ishaq Dar is currently leading continuous negotiations. He is meeting with officials from Iran and neighboring Gulf countries. The explicit goal is to promote regional stability and secure continuous energy shipments for the nation.