# Dubai Crude Jumps 10%, Putting Pakistan’s Fuel Pricing Mechanism to Test
**ISLAMABAD:** Dubai crude, a key benchmark for Asian markets including Pakistan, surged by **$8.20 per barrel, or 10.2%, to $88.99 per barrel** on Tuesday, raising concerns over the potential impact on Pakistan’s petroleum import costs and domestic fuel prices.
The sharp increase has come alongside rising international prices of **gasoline and gasoil**, while freight rates and import premiums have also climbed, creating additional pressure on the landed cost of petroleum products.
Industry sources said that if the current international market conditions persist, Pakistan could face a substantial increase in petroleum import costs, potentially translating into higher domestic prices of petrol and high-speed diesel.
However, Pakistan’s recently introduced **daily petroleum pricing mechanism** could provide some relief to consumers by preventing a sharp single-day movement in international oil prices from being passed on immediately and in full.
Under the averaging mechanism, fluctuations in international prices are spread over multiple days, potentially reducing the impact on domestic consumers if the current oil rally proves temporary.
The latest surge, however, is emerging as a major test for the new pricing mechanism amid exceptional volatility in global oil markets.
**Usama Qureshi, Vice Chairman of Cnergyico Pk Limited**, said the eventual impact on domestic prices would largely depend on the direction of international markets over the next several trading sessions.
He noted that if the increase reverses quickly, the averaging mechanism could substantially dilute its impact on Pakistani consumers.
However, if Dubai crude remains around **$89 per barrel or moves higher**, while gasoline, diesel, freight and import premiums remain elevated, the additional international costs would continue to put pressure on the domestic market.
Qureshi said daily pricing could change the **timing and pattern of the price shock rather than eliminate it**, with sustained increases potentially being passed through to consumers more gradually.
### Refiners Face Growing Risks
Oil-sector experts said the challenge extends beyond domestic fuel prices, as Pakistan must also ensure **uninterrupted petroleum supplies** during periods of international conflict and market disruption.
Pakistan has previously faced severe disruptions in global oil markets, during which the government, local refineries and other industry players coordinated efforts to maintain fuel supplies despite extreme price volatility.
The latest turmoil is once again testing that coordination.
Industry officials said sharp price swings create significant risks for refineries, which must make crude procurement and inventory decisions amid considerable uncertainty over future international prices.
While refiners in some international markets can reduce production and limit exposure during periods of extreme volatility, Pakistan’s refining sector operates under different circumstances, where maintaining domestic fuel availability has strategic importance.
Local refineries have historically continued operations during market disruptions and, where necessary, maintained or increased production despite taking substantial inventory and price risks to ensure adequate supplies.
A major risk arises when a refinery purchases crude at elevated prices and international prices subsequently decline before the resulting petroleum products are sold. This can leave the refinery facing substantial inventory losses while still being required to maintain domestic supplies.
Industry sources therefore stressed that the **strategic role of domestic refineries** should be taken into account as policymakers respond to the latest market volatility.
They noted that the government has previously adjusted petroleum pricing formulas during exceptional market conditions, with some measures adversely affecting refineries even as they continued operations and carried significant inventory and price exposure.
### Balancing Consumer Relief and Supply Security
Oil experts said policymakers now face a delicate balancing act: protecting consumers from sudden fuel price shocks while ensuring that **refineries, importers and oil marketing companies** remain financially capable of maintaining uninterrupted supplies.
They warned that if genuine international costs are suppressed or delayed for an extended period, the financial burden could shift further down the petroleum supply chain, potentially weakening companies’ ability to procure crude and refined products when international markets are already under severe pressure.
Pakistan’s domestic petroleum prices are influenced by several factors beyond crude oil, including **international refined-product prices, freight and insurance costs, import premiums, the rupee-dollar exchange rate, petroleum levy, margins and other applicable charges**.
The latest surge in Dubai crude therefore presents a significant test not only for Pakistan’s new daily pricing mechanism but also for the financial resilience of the country’s broader petroleum supply chain.
Story by Khalid Mustafa
