ISLAMABAD: Oil refineries have agreed to reduce their margins on high-speed diesel (HSD) by a further $3.9 per barrel at the government’s request, contributing to a reduction of Rs7.69 per litre in diesel prices on October 19.
Thank you for reading this post, don't forget to subscribe!The decision followed consultations between Petroleum Minister Ali Pervaiz Malik and executives of five refineries: Attock Refinery, National Refinery, Cnergyico Pk, Pakistan Refinery and Pak-Arab Refinery. During a meeting on Monday, the industry agreed to extend further relief to consumers despite mounting financial pressures linked to international crude oil prices.
Following the consultations, the federal cabinet approved a revised HSD pricing formula, setting the maximum allowable refinery crack at $38 per barrel while retaining the minimum floor at $11.33 per barrel. The latest reduction of $3.9 per barrel comes on top of earlier concessions made by the refining industry.
Responding to a query, Cnergyico Pk’s vice chairman said the refining sector had made unprecedented contributions during the ongoing crisis despite significant financial challenges.
He said refineries had supported consumers and the national interest by providing price relief, supplying discounted fuel for Hajj flights and offering fuel to the country’s defence forces at reduced prices.
The vice chairman noted that refineries continued to face financial pressure because the existing pricing mechanism did not fully reflect the actual cost of crude oil procurement in international markets.
He added that the realised crack spread on diesel remained low because the pricing formula did not adequately account for the cost of crude purchased at prevailing international prices.
The industry representative also urged the government to examine sectors that had raised the prices of goods and services citing higher fuel costs. He said these businesses should now pass on the benefit of lower diesel prices to consumers rather than retain the additional margins generated by earlier price increases.
He stressed that the refining industry’s contribution should be assessed in the broader context of national energy security, particularly as refineries continued supplying essential sectors despite financial constraints.
According to an official communication issued by the Petroleum Division to the Oil and Gas Regulatory Authority (OGRA) on October 19, the federal cabinet approved the revised diesel pricing mechanism following consultations with the industry.
Under the new formula, the maximum allowable diesel crack spread will be calculated using the average crack spread over the preceding seven working days, subject to a ceiling of $38 per barrel. The minimum floor will remain unchanged at $11.33 per barrel.
The cabinet also approved extending the revised crude-based pricing mechanism for another three months. However, the arrangement may be reviewed earlier if geopolitical conditions improve and international petroleum prices decline sharply.
All other parameters governing petroleum product pricing will remain unchanged.
Story by Zafar Bhutta
