Oil Industry Decries Unilateral 18‑20% Fuel Price Cut, Warns of Massive Losses

• Estimated losses of around Rs105 billion for refineries and marketing firms
• Several OMCs risk bankruptcy as foreign participation shrinks
• OCAC warns policy instability could drive investors away and jeopardise market viability

ISLAMABAD — The oil sector has lodged a formal protest against the prime minister’s recent decision to slash petroleum prices by 18‑20 percent, calling the move unilateral and contrary to established procedures. Industry analysts estimate the cut will cost refineries and oil marketing companies (OMCs) roughly Rs105 billion.

An industry executive noted that the federal cabinet approved the pricing mechanism four times within three months, each time altering the “goalposts” to the sector’s disadvantage amid already severe market conditions.

He cautioned that several OMCs could face bankruptcy, especially after the departure of major A‑class players such as Shell, Total, and Chevron.

The government initially used a 15‑day average when prices were rising, then shifted to a weekly average as import premiums and war‑risk surcharges surged, and finally moved to crude‑based pricing instead of product‑import benchmarks.

In the latest ruling, the government applied a three‑month average premium, even though the benchmark price from Pakistan State Oil (PSO) was unavailable. This occurred despite petroleum imports being vetted by the National Coordination and Management Council (NCMC), a newly formed civil‑military energy forum.

The executive illustrated that the ex‑refinery price for diesel should have fallen by Rs30 per litre on June 19 under the standard formula, but a cabinet decision issued by circulation reduced it by Rs81 per litre without any debate.

PSO alone is projected to lose about Rs50 billion, Pak‑Arab Refinery Company around Rs25 billion, while other firms could collectively incur losses of roughly Rs30 billion.

The Oil Companies’ Advisory Council (OCAC), representing more than three dozen refineries and OMCs, has submitted a protest letter to the government and requested an urgent meeting with CEOs early next week. Sources say the request was turned down for the current week.

OCAC expressed “grave concern over the continued unilateral petroleum pricing interventions undertaken by the government and their increasingly detrimental impact on the viability of Pakistan’s downstream petroleum sector.”

The council highlighted that abrupt pricing decisions impose severe financial strain and heighten policy uncertainty for investors and operators. Despite repeated representations, pricing changes continue to be implemented without meaningful consultation with the stakeholders who manage the nation’s fuel supply chain and strategic inventories.

According to OCAC, the latest price reduction was achieved by adopting yet another revised pricing formula, exposing the downstream industry to an “unprecedented financial shock.” Based on stock levels of roughly 505,000 tonnes of petrol and 655,000 tonnes of high‑speed diesel (HSD), the council estimates a value erosion of about Rs104 billion across OMCs and refineries.

These losses, OCAC asserts, directly erode working capital, liquidity, and shareholder value, stemming not from operational inefficiencies but from unilateral policy decisions imposed on an already stressed industry.

The council added that the sector has consistently supported the government’s goal of energy security and has worked to prevent supply disruptions.

Industry officials warned that the petroleum sector, once a magnet for foreign investment in storage, logistics, retail, and supply‑chain resilience, is now seeing dwindling investor confidence.

Investments were originally predicated on regulatory consistency and policy stability. Ongoing abrupt interventions risk prompting investor withdrawal, insolvency, and potential bankruptcy of weaker participants.

Despite mounting working‑capital pressures, OMCs have maintained nationwide distribution and strategic inventories, while refineries have capped HSD margins, kept pre‑war kerosene pricing for the armed forces, supplied jet fuel for Hajj flights at pre‑war rates, and contributed over Rs7 billion toward reducing the price‑differential claim—shared sacrifices made in the national interest.

Published in Dawn, June 22 2026

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