By SKM
May 20, 2026
ISLAMABAD — Pakistan’s premier oil refineries have sounded an urgent alarm over an unprecedented surge in smuggled cross-border fuel, warning the federal government that the unchecked black market is decimating local fuel demand and driving the downstream energy sector toward operational collapse.
In a joint distress call to the Oil and Gas Regulatory Authority (OGRA), the country’s refining heavyweights—including Pak-Arab Refinery (PARCO), Attock Refinery (ARL), National Refinery (NRL), Pakistan Refinery (PRL), and Cnergyico—disclosed that Oil Marketing Companies (OMCs) are drastically cutting back their purchase of locally produced fuel.
However, industrial sources said that the culprit is a relentless daily influx of unregulated, illicit petroleum products that is currently draining an estimated $35.6 million per month from the national economy.
While illicit fuel has traditionally been confined to the border regions of Balochistan, industry sources reveal that the cheap, untaxed product has now deeply penetrated major economic centers across Khyber Pakhtunkhwa (KPK), Sindh, and Punjab. Bypassing state customs, petroleum levies, and official regulatory checks, these informal imports are undercutting legally refined fuel, creating severe “distortions in demand” that leave formal supply chains struggling to compete.
Refinery executives in its letter to the regulatory stressed that the crisis is not a failure of domestic production capability, but rather an enforcement failure that threatens the sustainability of the entire sector. If the government fails to halt the black market pipeline, refineries warn they will be forced to drastically slash their throughput (production levels). Such cutbacks could trigger a dangerous domino effect, crippling the supply of vital co-products like jet fuel, LPG, and furnace oil, while forcing Pakistan into a deeper, more expensive reliance on foreign finished imports.
The high-level communication has been urgently copied to the Ministry of Energy’s Petroleum Division, signaling that the industry views this as a federal security and economic crisis. As inventory management challenges and pricing pressures mount, the refineries are demanding immediate, hardline border monitoring and retail clampdowns to protect the integrity of Pakistan’s regulated energy infrastructure before permanent damage is done. Ends
