Why Pakistan has created a petroleum price stabilisation fund

The move comes after weeks of volatility in global crude oil prices following the recent conflict involving the United States, Israel and Iran, which briefly pushed oil prices sharply higher. While Pakistan’s government had secured a few cargos directly through special diplomatic efforts, this fund has been handled on an ad hoc basis using administrative powers, instead of a formal legal framework.

Pakistan news agency Dawn’s sources said while there are no current deposits in the fund, it has been set up to take advantage of any future opportunities. They also said that all funds already built up over the past few months, or those which would be provided via any future austerity measures, could be credited to the fund. These resources would then be used to minimise the weekly petroleum price shocks for consumers.

The Pakistani government may look at alternate funding sources for the coming fiscal year, due to the financial restrictions imposed under the IMF program. However, some amount of money could still be set aside to stabilise the prices of POL (petroleum, oil, and lubricants).

In some cases, imports from the US, Russia and Iran, or specialised storage at warehouses, can give discounted prices in comparison to the standard imports from the Middle East. The benefits accumulated from such transactions will allow the fund to stabilise the prices, rather than letting the oil-importing companies and refineries obtain them directly.