by Liu Qiyu

As tensions around the Strait of Hormuz fuel inflation and energy insecurity, Pakistan is once again confronting a familiar challenge: how to shield its economy from imported energy shocks.

“When petrol becomes expensive, everything becomes expensive,” said Jabbar Khan, a father of nine. According to the Pakistan Bureau of Statistics (PBS), Pakistan’s headline inflation clocked in at 11.7% on a year-on-year (YoY) basis in May 2026, the highest level since June 2024. The latest rise in fuel prices has renewed concerns over inflation, foreign exchange pressures and energy security in the South Asian country, where imported oil and gas remain vital to economic activity.

The developments come as Pakistan seeks to consolidate economic stabilization achieved under recent reforms while pursuing higher growth in the new fiscal year. Experts warn that volatility in global energy markets continues to expose structural weaknesses in Pakistan’s energy system, prompting growing numbers of consumers and businesses to turn to solar power and electric vehicles (EVs) as a way to reduce dependence on costly imported fuels.

From Fuel to Everything

The impact of higher fuel prices is increasingly visible in everyday life.

“Five or ten years ago, we could buy all our kitchen supplies in 12,000 to 15,000 rupees. Today, even after spending 15,000 to 20,000 rupees, the shopkeeper hands us just one shopping bag,” Jabbar Khan said. Transportation costs, school expenses and household bills have all risen sharply, he added, while income opportunities remain uncertain.

Research by the Pakistan Institute of Development Economics (PIDE) suggests the impact extends far beyond the fuel pump. Higher fuel costs increase transportation and distribution expenses, raising production costs and eventually feeding into the prices of food, consumer goods and essential services across the economy.

For Saleem Abdullah, the pressure is even more immediate. “Even earning enough for two meals a day has become difficult,” he said, adding that a growing share of daily wages is now consumed by transportation costs, leaving less money for food and other necessities.

The same concerns are echoed by Musa Khan, a painter in Islamabad who earns around 25,000 Pakistani rupees per month. “I don’t know whether to pay the electricity bill, the gas bill, or manage household expenses.” His experience reflects a broader challenge facing many working-class households as fuel, utility and living costs continue to rise.

Why Pakistan Is Vulnerable

Muhammad Faran Khan, Associate Director, KTrade Securities, believes the latest crisis highlights Pakistan’s deep dependence on imported fossil fuels.

“Pakistan remains heavily dependent on imported fossil fuels. Roughly 80% to 85% of our energy imports come from the Gulf region and traverse the Strait of Hormuz,” Khan noted.

According to Khan, higher energy prices have already increased Pakistan’s import bill and added pressure on foreign exchange reserves, while rising transportation, housing and food costs continue to erode household purchasing power.

Pakistan’s vulnerability is rooted in the structure of its energy sector. Fossil fuels account for the majority of national energy consumption, while domestic oil and natural gas production has gradually declined over the past decade. The country also faces persistent challenges including circular debt in the power sector, limited strategic fuel reserves and chronic infrastructure inefficiencies.

Khan argued that repeated external shocks reveal the limits of the current model. While temporary measures can soften short-term price increases, he believes long-term resilience will require a gradual shift away from imported fuels toward domestic and renewable energy sources.

Searching for Alternatives

While rising fuel costs have created new pressures, they are also accelerating Pakistan’s search for alternatives.

Over the past several years, Pakistan has emerged as one of the world’s fastest-growing solar markets. Falling prices for solar equipment have encouraged households, farms and businesses to install rooftop systems in an effort to reduce electricity bills and improve energy reliability.

Much of this expansion has been enabled by the rapid decline in the cost of solar panels, largely driven by China’s dominance in global solar manufacturing. Chinese-made photovoltaic modules now account for the vast majority of solar imports entering Pakistan, making rooftop systems increasingly affordable for households and businesses. According to an assessment by the Institute for Energy Economics and Financial Analysis (IEEFA), this citizen-led transition has reached a spectacular scale, with rooftop solar now accounting for a quarter of Pakistan’s entire electricity supply.

For Khan, this trend represents more than a temporary response to high electricity prices. He believed expanding solar, wind and hydropower generation could significantly reduce Pakistan’s exposure to global energy volatility while improving long-term energy security.

Among consumers, support for solar energy appears to be growing rapidly.

Aslam Shah, who spends a large portion of his income on transportation and utility expenses, sees solar power as one of the most practical alternatives available to ordinary citizens. “Solar feels like a better solution because it becomes your own source of power.” He said unreliable electricity supply and rising utility bills have convinced many families that self-generated energy offers great certainty.

The same trend is visible among business owners. Faizan Obaid, an event planner in Islamabad, said transportation, logistics and electricity have become some of the largest operating costs for businesses. “Solar clearly looks like a much more reasonable option.” According to Obaid, renewable energy can help reduce operating expenses while providing greater predictability in an increasingly uncertain economic environment.

Turning to Electric Mobility

The search for alternatives is also reshaping Pakistan’s automotive sector.

Muhammad Aurangzeb, an Islamabad-based auto electrician specializing in hybrid and electric vehicles, recently completed a project converting a Suzuki Mehran into a fully electric vehicle capable of traveling more than 220 kilometers on a single charge.

“With petrol becoming so expensive, EVs are now the only practical alternative for many people,” Aurangzeb said, adding that growing fuel costs have significantly increased public interest in electric mobility. He believed EV adoption could accelerate further if local manufacturing expands and prices become more affordable.

The shift is already becoming visible in consumer behavior. Shakeel Ahmad, a mechanic with more than two decades of experience in Islamabad, said customer preferences have changed dramatically over the past year. “People are now moving away from large-engine vehicles and searching for EVs and hybrid cars.”

Analysts see growing cooperation with China as a potentially important catalyst for Pakistan’s EV transition. Chinese automakers and battery manufacturers are expanding their presence in Pakistan through assembly projects, technology partnerships and component investments, developments that could help lower costs and accelerate adoption.

Khan believed such cooperation could help Pakistan strengthen domestic industry while reducing dependence on imported fossil fuels. “Even a small percentage of China’s manufacturing capacity transferred to Pakistan could generate significant benefits.”

Recent projects involving electric vehicles, batteries, industrial manufacturing and energy infrastructure are increasingly viewed as examples of how bilateral cooperation could support Pakistan’s broader economic transformation.

Industry participants share a similar view. Aurangzeb believed expanded cooperation with Chinese firms could help make EVs more affordable for ordinary consumers, while Ahmad argued that local manufacturing would create new jobs and strengthen Pakistan’s automotive supply chain.

Beyond the Latest Crisis

For many Pakistanis, the latest fuel-price surge is a reminder of how quickly events far beyond the country’s borders can affect daily life. From transport costs to household budgets, fluctuations in global energy markets continue to be felt across the economy.

For families like Jabbar Khan’s, the question is no longer whether global energy shocks will return, but how to be better prepared when they do. As more households install solar panels and more drivers consider electric vehicles, the search for energy security is gradually moving from government policy to everyday decisions.