By SKM
March 30, 2026
ISLAMABAD: Pakistan’s fuel supply system is facing fresh uncertainty as the government considers overhauling the existing weekly petroleum pricing mechanism at a time of heightened global market volatility linked to tensions around the Strait of Hormuz.
According to official and industry sources, a proposal is under review to replace the current Platts-based weekly pricing formula with a system based on average inventory cost, calculated on a monthly or fortnightly basis. A committee constituted by the prime minister is examining the move, with Musadik Malik playing a key role in consultations.
The issue has gained urgency, with back-to-back meetings held between government officials, the Oil and Gas Regulatory Authority (OGRA), and representatives of oil marketing companies (OMCs). However, the industry has firmly opposed the proposed change, warning that it could disrupt fuel supplies if implemented under current conditions.
Stakeholders argue that the existing system aligns domestic prices with international benchmarks, ensuring that import costs are adequately reflected. Moving to an inventory cost-based model, they say, could create a mismatch between procurement costs and selling prices, discouraging imports and potentially leading to shortages.
The concerns come amid a sharp rise in global logistics and insurance costs. Freight charges have surged significantly, with shipments from Yanbu increasing from about $4 million to nearly $10 million, while costs from Fujairah have climbed from around $1 million to $4 million. Insurance premiums have also escalated from roughly 0.5% to close to 10%, further increasing the cost of imports.
However, official sources claim that Petroleum Minister Ali Pervaiz Malik is not in favor of the proposed change in the pricing formula, as it could unsettle oil marketing companies (OMCs) and risk disrupting fuel supplies, according to sources. The minister did not respond to queries on the matter. Officials at OGRA have also shown little support for the move, fearing it could prove detrimental to supply stability.
Industry officials caution that introducing a new pricing mechanism in the current environment would add pressure to an already strained supply chain. Sources said that instead of moving toward full deregulation of petroleum product prices, the government appears inclined to revert to a monthly or fortnightly pricing regime, effectively retaining a more direct role in price-setting.
“There is no room for misalignment between cost and price in the current scenario,” an industry source said, adding that any sustained losses would make imports commercially unviable.
Within the government, there are also indications of differing views. Petroleum Minister Ali Pervaiz Malik is reportedly not in favor of the proposed change, citing the risk of supply disruptions. OGRA officials are also said to have expressed reservations about the potential impact on market stability.
Analysts point to a recent increase in petroleum levy on high-octane blending component (HOBC) as an example of unintended consequences of abrupt policy changes. The move led to a shift in consumer demand toward subsidized petrol, resulting in a decline in HOBC sales and distortions in the market.
Market participants emphasize that policy predictability is critical for the sector, as frequent changes affect procurement planning, inventory management, and financial forecasting. They also highlight unresolved structural issues, including delays in input tax adjustments and limited mechanisms to address exchange rate losses.
Some officials have also floated the idea of targeted subsidies for specific consumer segments, such as motorcyclists and rickshaw drivers. However, industry representatives say such measures would be difficult to implement effectively without robust systems to ensure transparency and prevent misuse.
Experts suggest that a more sustainable approach would focus on strengthening domestic refining capacity and rationalizing import premiums to reduce reliance on costly imports.
For now, the proposed pricing shift remains under consideration. However, industry stakeholders have urged the government to proceed cautiously, warning that any abrupt change could undermine the stability of Pakistan’s fuel supply system at a time when external risks remain elevated. Ends
