KARACHI: The oil industry has expressed serious concerns over recent changes in the government’s petroleum product pricing methodology, warning that the revised mechanism could threaten fuel import sustainability and long-term energy security.
In a formal communication to the Ministry of Energy (Petroleum Division) and the Oil and Gas Regulatory Authority (OGRA), the Oil Companies Advisory Council (OCAC) said the revised pricing framework, effective June 6, 2026, introduces a calendar year-to-date averaging approach for key cost components of motor gasoline (Mogas), including import premiums, customs duties, and incidentals.
The industry body argued that the move deviates from the previously established market-linked pricing mechanism and was implemented without prior consultation with stakeholders.
According to OCAC, petroleum imports are typically arranged weeks in advance based on prevailing global market conditions and approved pricing formulas. Oil Marketing Companies (OMCs) depend on transparent benchmarks—particularly import premiums derived from Pakistan State Oil (PSO) cargoes—to make procurement decisions.
The council said the new averaging approach disconnects domestic fuel prices from real-time import costs, creating uncertainty for companies that have already committed to cargo purchases under different pricing assumptions.
Industry estimates suggest that the revised formula has reduced the ex-refinery benchmark price of Mogas by around Rs23.83 per litre compared to the previous week. However, OCAC maintained that this reduction does not reflect actual import costs and could lead to significant under-recoveries for fuel importers.
Sources in the oil sector warned that if procurement costs are not fully recoverable under the pricing mechanism, importers may hesitate to place future orders, potentially disrupting fuel availability in the domestic market.
Pakistan currently meets nearly 70 percent of its motor gasoline demand through imports, making the role of importing oil marketing companies critical for maintaining stable supply.
The OCAC further cautioned that increased uncertainty in pricing could discourage international suppliers and raise risk premiums on future shipments, ultimately offsetting any intended relief for consumers.
While acknowledging the government’s objective of reducing short-term price volatility and ensuring consumer stability, the council stressed that such measures should not result in sustained under-recovery of actual import costs by the industry.
OCAC has urged authorities to reconsider the newly introduced averaging mechanism and restore the previous market-linked system for determining import premiums, duties, and related cost components. It also called for any future revisions to be made in consultation with industry stakeholders.
The council emphasized the need for a stable, predictable, and sustainable pricing framework to ensure uninterrupted fuel imports, safeguard supply security, and maintain long-term policy certainty in the petroleum sector.
Story by Tanveer Malik
