ISLAMABAD: Pakistan’s oil industry has strongly criticized the government’s recent decision to slash petroleum prices by 18–20 percent, warning that the move could inflict losses of more than Rs105 billion on oil refineries and oil marketing companies (OMCs) and undermine investor confidence in the country’s downstream petroleum sector.
Industry representatives described the price reduction as a unilateral decision that deviated from established pricing mechanisms and was implemented without meaningful consultation with stakeholders.
A senior industry executive said the federal cabinet had revised the petroleum pricing methodology four times within less than three months, with each adjustment adversely affecting the industry. He warned that several OMCs could face severe financial distress or even bankruptcy, noting that Pakistan has already witnessed the exit of major international players such as Shell, Total, and Chevron.
According to the executive, the government initially relied on a 15-day average pricing formula when international oil prices were rising, later switched to a weekly average as import premiums and war-risk surcharges increased, and subsequently adopted crude oil-based pricing instead of product import benchmarks.
In the latest revision, the government reportedly used a three-month average premium despite the absence of the benchmark data typically provided by Pakistan State Oil (PSO). The executive argued that petroleum imports are regularly reviewed and approved by the National Coordination and Management Council (NCMC), a civil-military forum overseeing energy supplies and pricing.
He cited high-speed diesel (HSD) as an example, stating that under the prevailing formula, the ex-refinery price should have decreased by approximately Rs30 per litre on June 19. However, a cabinet decision approved through circulation reduced the price by Rs81 per litre, significantly increasing the financial burden on industry participants.
The executive estimated that PSO alone could incur losses of nearly Rs50 billion, while Pak-Arab Refinery Company (PARCO) may face losses of around Rs25 billion. Other refineries and OMCs are collectively expected to absorb losses exceeding Rs30 billion.
The Oil Companies Advisory Council (OCAC), representing more than three dozen refineries and OMCs, has formally lodged a protest with the government and requested an urgent meeting with senior officials and company CEOs. However, according to sources, the request has not yet been accommodated.
In its communication to the government, OCAC expressed “grave concern” over what it termed continued unilateral interventions in petroleum pricing, warning that such measures threaten the financial viability of Pakistan’s downstream petroleum industry.
The council stated that abrupt policy changes and regulatory uncertainty are causing severe financial repercussions for companies responsible for maintaining fuel supplies and strategic petroleum reserves. It argued that the latest price cut was achieved by introducing yet another revised pricing formula, exposing the industry to substantial financial losses.
Based on industry inventories of approximately 505,000 tonnes of petrol and 655,000 tonnes of high-speed diesel, OCAC estimated a total erosion in inventory value of around Rs104 billion across refineries and OMCs.
The council emphasized that these losses represent a direct hit to working capital, liquidity, and shareholder value, stressing that they stem from policy decisions rather than operational inefficiencies or market competition.
Despite mounting financial pressures, OCAC noted that the industry has continued to support national energy security objectives. Refineries and OMCs have maintained strategic fuel stocks, capped HSD margins, supplied kerosene to the armed forces at pre-war rates, provided jet fuel for Haj operations at unchanged prices, and contributed more than Rs7 billion to offset price differential claims.
The industry warned that persistent policy uncertainty could discourage future investment in storage infrastructure, logistics networks, retail expansion, and supply chain resilience. It cautioned that continued regulatory interventions may lead to investor withdrawal, insolvencies, and the eventual collapse of weaker market participants, posing risks to Pakistan’s long-term energy security.
Story by Khaleeq Kiani
