Pakistan to take emergency measures on petroleum pricing ‘to keep markets liquid’

ISLAMABAD: Pakistan is set to take a series of major measures —including weekly petroleum price revision, compensating oil companies for elevated costs of insurance and import premiums, and fuel conservation measures like mandatory work from home — to keep the markets liquid amid the drying out of trade movement following the closure of the Strait of Hormuz.

A summary is being submitted to the federal cabinet’s Economic Coordination Committee (ECC) in this regard for action without delay as petroleum prices appeared to surge, informed sources told Dawn.

However, even before the ECC takes these decisions, the state-run Pakistan State Oil (PSO), under the government’s assent, has launched two import tenders each for petrol and diesel outside the Strait of Hormuz as a precaution, although both product stocks are among the highest in the country at present.

Both petrol and diesel have over 500,000 tonnes of stocks, enough for 26 and 25 days’ cover. Meanwhile, Saudi Arabia has already been requested to provide oil supplies through an alternative Red Sea route.

According to the officials, the Centre had directed all provincial chief secretaries to attend the meeting of the newly created 18-member cabinet committee to monitor petroleum prices scheduled for Thursday. The meeting will consider mandatory work from home wherever possible for the public and private sectors. The meeting could consider other measures as well, with the coordination of the provinces.

While petrol imports continue to be in the safe zone, diesel imports are not; Pakistan heavily relies on long-term supplies from Kuwait with PSO and all those cargoes have to move through the Strait of Hormuz. Additionally, more than 20 per cent of global oil cargoes are reportedly stuck inside the Strait, creating a shortage of ships for diesel.

The officials further said insurance costs for oil companies have surged from around $30,000 to $400,000 per ship, in addition to import premiums for petroleum products. The current pricing is around $3-5 per barrel, the prices at which the PSO had booked cargoes in February but which is no longer the case as fresh orders are placed. As a result, freight costs have also surged as the ship rate has gone beyond $4 million, which was available for no more than $900,000 before the crisis.

The combination of these three factors is exponential and could not be expected of the oil marketing companies (OMCs) and refineries to absorb. Unless properly compensated, OMCs would have sufficient grounds to avoid imports and declare force majeure.

Therefore, a summary to the ECC would provide a mechanism for payment of these additional exigencies to keep OMCs afloat and, in return, maintain their supply chain down to the retail stage.

The fortnightly price revision is also being shifted to a weekly basis immediately to avoid a fiscal bulge on OMCs and the government by recovering the true costs of fuel supplies from consumers on a continuous basis and ensuring smooth supplies as well.

One official said that the price gap has risen to Rs45-50 for diesel and around Rs25-26 for petrol in the first week of the crisis and could grow over the next 15 days, and hence needed to be nipped in the bud.

Notwithstanding hue and cry from dealers over limited supplies, the Oil and Gas Regulatory Authority (Ogra) and OMCs have jointly decided to provide petrol and diesel supplies to dealers and retailers on the respective 8-month track record and have stopped unlimited supplies to avoid supply disruptions.

“Still, there was no shortage of petrol or diesel anywhere in the country,” a senior government official said.

In response to dealers’ complaints that OMCs were not honouring product orders, Ogra said that to ensure the uninterrupted availability of petroleum products and to discourage hoarding during periods of extreme price volatility, the companies may temporarily regulate supplies to retail outlets based on their historical sales patterns.

“This measure is a standard supply management practice aimed at maintaining stability in the distribution system,” the authority said. It reassured the public that the country currently had adequate stocks of petrol and diesel, well within the required limits.

“There is no shortage of petroleum products. Citizens are advised not to pay attention to rumours and to rely only on information issued through official channels,” it said.

Finance minister chairs cabinet committee

Meanwhile, Finance Minister Muhammad Aurangzeb chaired a meeting of the cabinet committee for monitoring petrol prices. The meeting continued its deliberations on the evolving regional and global energy situation and undertook a detailed review of petroleum stock levels and supply chains across the country.

Participants were briefed on the country’s stocks of crude oil and refined petroleum products, including petrol, diesel, aviation fuels and LPG, along with their respective days of cover and daily consumption patterns.

The meeting was also briefed on global oil market developments, including movements in international benchmark prices, freight and insurance costs, shipping route dynamics, and evolving conditions in key maritime corridors.

The committee noted that the international energy environment remained fluid, particularly given the uncertainty surrounding the Strait of Hormuz and its implications for global energy trade. The participants reviewed developments in liquefied natural gas (LNG) and liquefied petroleum gas (LPG) markets as well.

The committee was informed that while LNG imports under long-term arrangements remained an important component of Pakistan’s energy supply mix, disruptions in regional shipping routes could affect global LNG logistics. LPG inflows through cross-border channels were also being closely monitored to ensure uninterrupted domestic availability.

The committee discussed a range of contingency measures to strengthen supply security, including engagement with international partners and exploration of alternative sourcing routes. In this regard, members were informed of ongoing diplomatic and commercial engagement with friendly countries and suppliers in the region to secure additional crude and petroleum supplies where necessary.

The committee also noted efforts underway to diversify procurement options through regional energy hubs, including potential arrangements through ports in the Red Sea and the Gulf region, in order to maintain the continuity of refinery operations and ensure supply resilience. The members further reviewed energy conservation measures as part of broader contingency planning aimed at managing demand efficiently while maintaining orderly market conditions.

The committee emphasised that while supply conditions remained stable, prudent energy use and conservation at all levels would help strengthen national preparedness should international uncertainties persist.

The finance minister emphasised that ensuring the uninterrupted availability of petroleum products remained the government’s foremost priority and would continue to guide all policy decisions.

The committee also stressed the importance of preventing hoarding, diversion, or smuggling of petroleum products, particularly in times of international volatility and directed to maintain heightened vigilance and strengthen coordination with provincial governments to ensure that domestic supplies remain protected.

It was further decided that the chief secretaries of all provinces would participate in the committee’s meeting tomorrow to deliberate on the final summary and proposed national action plan.

The committee would continue its deliberations to finalise a comprehensive strategy to be implemented at the national level with the cooperation of all stakeholders.