The government of Pakistan has begun reviewing ways used to determine petroleum product prices, after there were growing concerns from the oil industry over financial losses, policy uncertainty, and frequent changes to the pricing systems.
Additionally, this issue was discussed during an important meeting attended by government officials, oil marketing companies (OMCs), and refinery representatives. As an outcome, it was stated that there would be no immediate changes to the existing weekly pricing system.
Further, the government announced that future petrol prices may be linked to $15.85 per barrel based on Pakistan State Oil’s (PSO) latest cargo imports. However, this approach will mainly apply to petrol, while diesel pricing would continue under Kuwait Petroleum premiums, which range between $5 and $6 barrel.
Additionally, industry representatives argued that constant modifications have damaged businesses.
According to Oil Companies Advisory Council (OCAC) Chairman Asif Iqbal, the industry has witnessed seven changes to the diesel pricing formula within 3 months. He warned that such instability has negatively affected the petroleum sector.
Moreover, refineries raised concerns regarding the increasing use of smuggled diesel in Pakistan. Amir Abbasi, Chief Executive of Sanjrico Petroleum, said illegal diesel imports have affected the sector. Foreign investors also expressed concern over regulatory uncertainty. Investors considering the ongoing situation may reconsider investments if instability continues.
Another major issue discussed was the delayed implementation of refinery upgrade projects worth more than Rs66 billion. Representatives argued that due to the uncertainties in the government policies, companies are preventing from proceeding with expansion plans. The petroleum sector urged the government to restore the previous pricing system and create transparency to avoid future losses.
Federal Petroleum Minister Ali Pervaiz Malik clarified that the seven-day pricing system will not be changed immediately. Prime Minister Shehbaz Sharif has formed a committee to review pricing proposals and submit recommendations.
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