The study discusses ways by which the government can cushion the effects of high oil prices on the poor and the economy as a whole. As a background, the paper presents the movements in oil prices in the world market and the oversight efforts of government under a deregulated set-up of the oil industry. It also explains the components of the retail pump price, the revenues generated from VAT on oil, and the fuel subsidy program of the government. The paper also emphasizes that instead of overspending on subsidies, windfall revenues from VAT can be better used for employment-generating, productivity-enhancing, and growth-inducing expenditures.