ISLAMABAD: The Oil Companies Advisory Council (OCAC) has voiced strong opposition to a proposed government move to recover inventory valuation gains from oil marketing companies (OMCs), warning that such a measure could undermine energy security, market stability, and the sustainability of Pakistan’s petroleum supply chain.
In a letter addressed to the Secretary Petroleum Division, the OCAC expressed concern over media reports suggesting that a high-level committee had been formed to review the cross-subsidy mechanism and examine the recovery of inventory gains arising from fluctuations in international oil prices.
The council noted that while no formal communication had been received by the industry, the reports had generated considerable concern among stakeholders. It argued that recovering inventory gains during periods of rising oil prices, while leaving inventory losses entirely with the industry during price declines, would create an unfair and inconsistent regulatory framework.
According to the OCAC, the oil sector is already facing significant financial challenges, including outstanding Price Differential Claims (PDCs) amounting to approximately Rs66.7 billion, stagnant OMC margins, rising operational costs, increasing compliance requirements, and persistent policy uncertainties.
The industry body emphasized that inventory gains and losses are part of a single risk cycle associated with maintaining mandatory petroleum stocks. Under existing regulations, OMCs are required to maintain a 20-day stock cover to ensure uninterrupted fuel supplies and support national energy security.
“Inventory valuation gains should not be viewed as windfall profits,” the council stated, adding that they are a natural component of the broader risk-return framework linked to maintaining strategic fuel inventories in a highly volatile global market.
The OCAC pointed out that Pakistan remains heavily dependent on imported energy, with nearly 80% of crude oil requirements, 70% of motor gasoline, and 30% of high-speed diesel sourced from international markets. As a result, OMCs remain continuously exposed to global price fluctuations while fulfilling statutory stockholding obligations.
The council further noted that international market indicators for July–September 2026 suggest weakening global demand, easing freight rates, and a gradual reduction in geopolitical risk premiums. These factors could lead to price corrections in the coming months, potentially offsetting much of the inventory gains currently under discussion.
The OCAC urged the government to evaluate any proposed recovery mechanism within the context of the complete inventory risk cycle and to ensure that policy decisions are guided by fairness, regulatory consistency, and long-term energy security considerations.
The industry reiterated its commitment to maintaining uninterrupted fuel supplies and highlighted its role in ensuring market stability during recent geopolitical disruptions and supply uncertainties.
Story by Zafar Bhutta
