Pakistan weighs weekly fuel price resets as Hormuz risk points to hike of up to Rs50 per litre: report

Pakistan is preparing contingency measures to secure fuel supplies amid uncertainty around the Strait of Hormuz, with officials warning that the initial cost pass-through could push petrol up by about Rs 25 per litre and high-speed diesel by Rs 45 to Rs 50 per litre, while the government considers weekly petroleum price revisions, compensation for higher insurance, import premiums and freight, and conservation steps such as work-from-home where feasible, Dawn reported. 

Sources said an immediate summary is being sent to the Economic Coordination Committee of the cabinet for decisions, as authorities expect import-linked costs to push up domestic prices. They said that the government is also factoring in risks of hoarding and black marketing around price gains.

Even before the ECC takes up the plan, Pakistan State Oil, with government consent, has floated two tenders each for petrol and diesel imports routed outside the Strait of Hormuz as a precaution, the sources said. Officials said petrol and diesel stocks are currently above 500,000 tonnes each, which they said is enough for about 25 to 26 days.

Officials said Saudi Arabia has been asked to route supplies through an alternative Red Sea corridor. They added that a newly formed 18-member cabinet committee on the oil situation, chaired by the finance minister, is meeting on Thursday with provincial chief secretaries to review measures, including work-from-home in public and private sectors where possible, along with other fuel-saving steps.

Officials said petrol imports remain comparatively less exposed, while diesel supply carries higher risk because Pakistan relies heavily on long-term supplies from Kuwait routed through the Strait of Hormuz. They also said reports of oil cargoes stuck in or near the strait have tightened vessel availability for diesel movements.

Sources said war-risk insurance costs have jumped from about $30,000 to around $400,000 per ship, alongside higher import premiums for petroleum products. Freight rates have also surged, with ship rates cited above $4 million compared with about $900,000 before the crisis.

Officials said the ECC summary proposes a mechanism to reimburse oil marketing companies and refineries for these additional costs so imports continue and retail supplies remain uninterrupted. They added that weekly price revisions are being considered to recover the changing cost of supplies more frequently and avoid a buildup of losses for companies and the government.

Briefing the Senate Standing Committee on Finance on Wednesday, the finance minister said global uncertainty could affect oil supplies but told lawmakers there was no emergency-like situation in Pakistan and urged conservation as a preventive measure. The committee was told the country has around 28 days of petrol and diesel stocks, about 10 days of crude oil stocks, and around 15 days of LPG and LNG supplies.

Officials said some cargoes have been delayed in Qatar, while domestic gas production is being enhanced to cover shortfalls, and the finance ministry will hold daily monitoring meetings on stocks and international prices.

The SBP governor told the committee that global oil prices could rise to about $100 per barrel if tensions persist, adding pressure on the external account, as energy imports form a large part of Pakistan’s import bill. He said foreign exchange reserves stand above $16 billion and are projected at about $18 billion by June and around $20 billion by December 2026, and SBP expects inflation to remain in the 5% to 7% range during the current fiscal year.

Separately, Oil and Gas Development Company is preparing to raise output for the first time in recent years amid the regional situation, according to Reuters. The company plans to increase crude oil production by 14% to about 40,000 barrels per day and has indicated further increases could follow new discoveries, subject to offtake by buyers.