ISLAMABAD: The Oil Companies Advisory Council (OCAC) has expressed serious reservations over reported government plans to review inventory gains and introduce a cross-subsidy mechanism in the petroleum sector, warning that such measures could undermine energy security and destabilise market operations.
In a letter addressed to the Federal Secretary, Ministry of Energy (Petroleum Division), the OCAC said recent media reports regarding the formation of a high-level committee to examine the recovery of inventory gains have created uncertainty in the industry, despite the absence of any formal communication from authorities.
The council stressed that any policy intervention must be based on fairness, regulatory consistency, and long-term energy security, while taking into account the operational realities of Pakistan’s oil marketing sector.
Referring to recent global market conditions, OCAC noted that the March–April 2026 period witnessed significant geopolitical volatility, which led to sharp fluctuations in international oil prices. It argued that inventory gains during such periods are temporary in nature and often reverse when market conditions stabilise, describing them as part of a broader “inventory risk cycle” rather than windfall profits.
The council further warned that oil marketing companies (OMCs) are also exposed to inventory losses during periods of falling prices, and any policy that seeks to recover gains without accounting for such losses would create an unbalanced and unfair framework.
OCAC highlighted that OMCs are legally required to maintain a mandatory 20-day stock cover to ensure uninterrupted fuel supply across the country. It said these inventories are held for energy security purposes, not for speculative trading.
Pakistan’s heavy dependence on imports—around 80% of crude oil, 70% of motor gasoline, and 30% of high-speed diesel—makes the sector highly vulnerable to international price volatility, the council added.
The industry body also noted emerging global trends suggesting easing demand and geopolitical pressures in the coming months, which could potentially lead to price corrections and offset recent gains.
OCAC warned that any precedent of recovering inventory gains during price upswings, while leaving losses entirely to companies, could discourage adequate stockholding and weaken national fuel supply resilience during emergencies.
It also highlighted financial stress in the sector, including outstanding Price Differential Claims (PDC) of around Rs66.7 billion, stagnant profit margins, rising operational costs, and increasing regulatory compliance burdens, urging the government to adopt a consultative and balanced policy approach.
