It appears that the economic basis of domestic petroleum product pricing has, hitherto, received inadequate attention from economists. International comparisons of petroleum product pricing show that domestic markets are highly distorted. This article argues that despite significant developments in theoretical and applied economics, economic theories do not provide any ready made solutions for energy pricing issues to the policy makers who have to deal with a large set of practical issues. As a result, it is not unusual to encounter gross misapplication of economic rules in petroleum pricing policies. This work also focuses on the possible effects of changing domestic market structure vis-a-vis pricing policies.