An important emergency meeting was held between the government and the oil industry regarding the pricing of petroleum products in the country and the financial crisis faced by the industry.
The Petroleum Division, while addressing the growing concerns of oil marketing companies (OMCs) and refineries, assured that future petroleum prices will be determined on the basis of actual import premiums, while no further changes will currently be made to the existing weekly pricing system.
The meeting was chaired by Federal Minister for Petroleum Ali Pervaiz Malik and Petroleum Secretary Hamid Yaqoob Sheikh, and was attended by heads of all major oil marketing companies and refineries in the country.
New formula for petrol and diesel prices
Officials clarified during the meeting that the price of petrol in the future will be set based on Pakistan State Oil’s (PSO) latest import cargo premium of $15.85 per barrel.
Officials believe that recent policy changes have placed the greatest financial burden on PSO. Similarly, high-speed diesel pricing will continue to be determined based on PSO’s import premium from Kuwait Petroleum, currently around $5 to $6 per barrel.
Frequent changes and loss of profits
Chairman of the Oil Companies Advisory Council (OCAC), Asif Iqbal, presented the industry’s concerns and expressed serious reservations.
He stated that in the last three months alone, the diesel pricing formula was changed seven times and the petrol formula four times, creating severe instability in the industry.
He further revealed that sudden changes in pricing wiped out an entire year’s accumulated profits in a single day, making foreign investment unlikely under such uncertainty.
Smuggled diesel influx and refinery concerns
Synergeco Petroleum CEO Amir Abbasi highlighted the poor condition of local refineries, stating that the influx of smuggled high-speed diesel is putting severe pressure on domestic refineries and threatening their survival.
He demanded full deregulation of pricing and effective action against smuggling.
Refinery representatives also strongly protested the government’s decision to withdraw a 2.5% deemed duty allocated for refinery upgrades.
Concerns over foreign investor withdrawal and allegations against OGRA
Wafi Energy CEO Zubair Sheikh warned that foreign investors based in the UAE were shocked by the massive losses incurred overnight.
He said continued policy instability could force foreign investors to pull out of Pakistan.
During the meeting, some companies also accused the Oil and Gas Regulatory Authority (OGRA) of withholding over Rs 66 billion in price differential claims (PDCs), causing a severe working capital crisis.
They also demanded withdrawal of the new pricing formula introduced on June 19 and restoration of the previous system.
Government stance and phased deregulation
Federal Minister Ali Pervaiz Malik clarified that the 7-day pricing system will not be changed immediately, as Prime Minister Shehbaz Sharif has formed a high-level committee to review petroleum pricing.
He added that full deregulation will not happen immediately but will be introduced in phases, potentially moving from weekly to even daily price adjustments in the future.
Tensions during the meeting
According to media reports, tensions were observed between officials and industry representatives during the meeting.
The minister and secretary criticized some representatives for not effectively presenting the government’s position at the National Coordination and Management Council.
When companies complained about OGRA’s leadership unavailability, the minister advised them to approach the Prime Minister.
However, OCAC Chairman Asif Iqbal acknowledged that OGRA had allowed them time to present their position, although their recommendations were not fully incorporated into final decisions.
Pakistan’s petroleum pricing crisis
Pakistan previously used a 15-day pricing system, which was recently changed to a weekly system in the name of market flexibility.
The aim was to pass on global market effects quickly, but it has created major financial and operational challenges for oil marketing companies.
In the past, politically frozen prices led to billions in price differential claims (PDCs), causing fuel shortages. The current Rs 66 billion claims are considered a continuation of that crisis.
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