Fund created to mitigate oil price shocks

ISLAMABAD: The government on Monday notified a new head of account to establish a price stabilisation fund for petroleum products, following a June 5 decision by the federal cabinet.

“All proceeds received in the name of the Petro­leum Prices Stabilisation Fund will be credited to the Public Account of the Federation under the major head ‘Special Deposit Fund’,” stated a notification issued by the Ministry of Finance.

The notification expla­ined that the modalities, including the operating procedures for governing the Fund, would be finalised by the finance division, the petroleum division and the Oil and Gas Regulatory Authority (Ogra) in accordance with legal and financial requirements. Nece­ssary approvals will be sought separately.

The need for the Fund arose following historic price hikes in recent months due to the US-Israel war on Iran. While a few cargos were previously secured directly by the government through special diplomatic efforts, yielding substantial price savings compared to normal industry practices, this was handled on an ad hoc basis using administrative powers rather than a formal legal framework.

Informed sources stated that while the Fund does not currently hold any deposits, the decision was made to capitalize on future unforeseen opportunities. They added that funds already accrued over the past few months, or those made available through future austerity measures, could be credited to the Fund. These resources would be used for weekly adjustments in petroleum prices to minimise price shocks for consumers.

Sources also noted that the government may tap new funding sources in the upcoming fiscal year, given the financial maneuvering restrictions imposed under the IMF program. However, a limited amount from special provincial grants to the federal government could still be set aside for POL (petroleum, oil, and lubricants) price stability.

In certain cases, oil imports from unconventional sources such as the US, Russia and Iran, or specialised storage at warehouses can provide discounts compared to standard imports from the Middle East. The Fund will allow these windfalls to be channeled fully or partially into price stabilisation, rather than letting the benefits flow exclusively to oil-importing companies and refineries.

Published in Dawn, June 30th, 2026