By SKM
June 22, 2026
ISLAMABAD: Pakistan’s downstream petroleum sector has warned that continued government intervention in fuel pricing has pushed the industry to a “critical juncture”, with oil marketing companies (OMCs) and refineries facing losses of more than Rs104 billion, raising fears of investor flight, insolvencies and a potential weakening of the country’s energy supply chain.
In an urgent letter to Petroleum Minister Ali Pervaiz Malik, the Oil Companies Advisory Council (OCAC) accused the government of repeatedly imposing fuel pricing decisions without meaningful consultation, arguing that the latest reduction in petroleum prices has inflicted an unprecedented financial shock on the industry.
The council said the latest price cut was implemented through a new pricing mechanism that wiped out the value of fuel inventories acquired at higher international prices. Based on industry stocks of around 505,000 metric tons of petrol and 655,000 metric tons of high-speed diesel, OCAC estimated the resulting inventory loss at approximately Rs104 billion across OMCs and refineries.
Describing the impact as a direct destruction of working capital and liquidity, the industry argued that the losses were not the result of market forces, competition or operational inefficiencies but stemmed solely from a unilateral policy decision.
The letter reflects growing frustration within the petroleum sector, which claims it has repeatedly cautioned the government about the financial consequences of abrupt pricing interventions. Despite these warnings, OCAC said, pricing decisions continue to be made without involving companies responsible for maintaining the country’s fuel distribution network and strategic petroleum reserves.
The council stressed that the latest losses come on top of mounting financial pressures already facing the sector. OMC margins have not been revised since 2023 despite sustained inflation and rising operational costs, while outstanding Price Differential Claims (PDCs) remain unpaid at approximately Rs66.7 billion, according to the industry.
OCAC also highlighted what it described as a contradiction in government policy. While companies are legally required to maintain strategic fuel stocks to safeguard national energy security, they are simultaneously being exposed to sudden inventory losses whenever fuel prices are reduced through administrative decisions.
The industry warned that the consequences could extend far beyond balance sheets. It said continued policy uncertainty is likely to accelerate the withdrawal of foreign investors from Pakistan’s petroleum sector and could force financially weaker companies into insolvency or bankruptcy.
“Such an outcome would severely damage investor confidence at the very time Pakistan is actively seeking foreign direct investment across the economy,” the council said.
The warning is particularly significant because Pakistan’s downstream petroleum sector has historically attracted substantial investment in fuel storage facilities, logistics infrastructure, retail networks and supply-chain operations. Industry leaders argue that these investments were made on the assumption of regulatory predictability and commercial stability—conditions they now say are being undermined.
OCAC further reminded the government that the sector had absorbed significant costs in recent months to support national energy security. OMCs continued to maintain fuel supplies and mandatory inventories despite volatile global markets, while refineries capped diesel margins, supplied fuel to the armed forces and Hajj operations at pre-war rates, and contributed more than Rs7 billion toward reducing the government’s fuel subsidy burden.
Against this backdrop, the council said the industry could no longer continue absorbing what it termed “extraordinary policy-induced losses” and urged the government to immediately engage with stakeholders before irreversible damage is done.
The industry has sought an urgent meeting with the petroleum minister to discuss a consultative pricing framework, protection of strategic inventories from abrupt value destruction and measures to restore investor confidence.
The letter signals an increasingly sharp confrontation between the government and the petroleum industry, with companies warning that using industry balance sheets to finance consumer fuel relief is commercially unsustainable and could ultimately threaten the long-term viability of a sector considered critical to Pakistan’s economic stability and energy security. Ends
