Oil industry cries out over unilateral cut in fuel prices

• Estimates losses of around Rs105bn for refineries and marketing companies
• Several OMCs warn of possible bankruptcy amid already shrinking foreign participation in sector
• OCAC warns continued policy instability could trigger investor withdrawal and threaten long-term market viability

ISLAMABAD: The country’s oil industry has protested against a record 18–20 per cent cut in petroleum prices announced by the prime minister last week, alleging the decision as unilateral, inconsistent with established processes, and resulting in an estimated Rs105 billion loss to oil refineries and oil marketing companies (OMCs).

An industry executive said the federal cabinet had approved the pricing mechanism four times in less than three months, and each time the “goalposts were changed” to the industry’s disadvantage during extremely challenging conditions.

He warned that several OMCs could face bankruptcy, adding that the country was already short of A-class companies following the exit of Shell, Total, and Chevron.

He said the government first used a 15-day average when prices were rising, then switched to a weekly average as prices, import premiums, and war risk surcharges surged, and later moved to crude-based pricing instead of product imports.

In the latest decision, he said, the government used average premiums of three months, while the actual benchmark of Pakistan State Oil (PSO) was not available. This was despite petroleum imports being reviewed and approved by the National Coordination and Management Council (NCMC), a newly created civil-military forum on energy supplies and pricing.

Giving an example, he said the ex-refinery price for diesel should have dropped by Rs30 per litre on June 19 under the prevailing formula but was reduced by Rs81 per litre under a cabinet decision taken through circulation, without any debate or discussion.

He added that PSO alone was expected to suffer losses of about Rs50 billion after the latest price adjustment, followed by around Rs25 billion for Pak-Arab Refinery Company, while all other companies were likely to jointly lose about Rs30 billion.

The Oil Companies’ Advisory Council (OCAC), a body comprising over three dozen refineries and OMCs, has formally written a protest letter to the government and sought an urgent meeting with all CEOs on Monday or Tuesday. The request has reportedly been declined for the week, according to official sources.

The OCAC expressed “grave concern over the continued unilateral petroleum pricing interventions undertaken by the government and their increasingly detrimental impact on the viability of Pakistan’s downstream petroleum sector”.

It said the industry had repeatedly highlighted the severe financial consequences of abrupt pricing decisions and growing policy uncertainty for investors and operators. Despite numerous representations to various forums, pricing decisions continued to be implemented without meaningful consultation with stakeholders responsible for maintaining the country’s fuel supply chain and strategic petroleum inventories.

The council alleged that the latest reduction in prices was achieved at the expense of the downstream petroleum industry by adopting yet another revised pricing formula, resulting in significant financial exposure for companies. It estimated an “unprecedented financial shock” based on industry stocks of approximately 505,000 tonnes of petrol and 655,000 tonnes of high-speed diesel (HSD), translating into an estimated Rs104 billion erosion in value across OMCs and refineries.

The OCAC said these losses represented a direct erosion of working capital, liquidity, and shareholder value. It added that the losses were not due to operational inefficiencies or market competition but were the result of unilateral policy decisions imposed on an industry already under financial stress.

It further stated that the industry had consistently supported the government’s objective of maintaining energy security and preventing supply disruptions.

The industry warned that the petroleum sector, which had historically attracted significant foreign investment in storage infrastructure, logistics networks, retail development, and supply chain resilience, was now facing declining investor confidence.

It said investments were originally made on the basis of regulatory consistency and policy stability. However, continued abrupt interventions could lead to investor withdrawal, insolvency, and possible bankruptcy of weaker participants.

According to the council, OMCs maintained nationwide distribution and strategic inventories despite mounting working capital pressures, while refineries supported national efforts by capping HSD margins, maintaining pre-war kerosene pricing for the armed forces, supplying jet fuel for Haj flights at pre-war rates, and contributing over Rs7 billion towards reducing the price differential claim. These, it said, were shared sacrifices made in the national interest.

Published in Dawn, June 22nd, 2026 ...