Oil industry seeks SBP relief as gulf shipping crisis drives up freight and insurance

ISLAMABAD:Pakistan’s oil industry has sought urgent regulatory relief from the State Bank of Pakistan (SBP), warning that escalating geopolitical tensions in the Middle East have severely disrupted global oil shipping markets and could threaten the country’s fuel supply chain.

In a formal letter dated March 09, 2026 addressed to Jameel Ahmad, Governor of the State Bank of Pakistan, the Oil Companies Advisory Council (OCAC) requested temporary approval to import petroleum cargoes on a CIF (Cost, Insurance and Freight) basis instead of the currently mandated C&F (Cost and Freight) arrangement. OCAC also warned that soaring war-risk insurance and freight costs amid Middle East tensions could threaten Pakistan’s fuel supply chain.

Highlighting the rapidly evolving situation in the region, the council wrote that “due to the rapidly evolving geopolitical situation in the Middle East, the international oil and shipping markets have become extremely volatile. Freight rates, insurance costs and availability of vessels have been severely impacted.”

The industry body pointed out that insurers and shipping companies have significantly scaled back their exposure to voyages in the Persian Gulf amid rising regional tensions. According to the letter, “marine insurers have either withdrawn or sharply increased war-risk coverage for ships operating in the Persian Gulf and Strait of Hormuz due to the ongoing Iran-Israel-US conflict.”

OCAC further warned that freight costs for tankers operating in the Gulf region have surged dramatically. The council noted in the letter that “freight rates for vessels operating in the Gulf region have reportedly increased by almost four times, while war-risk insurance premiums for Gulf voyages have surged dramatically.”

Under Pakistan’s current regulatory framework, oil marketing companies and refineries are required to import petroleum products on a C&F basis. Under this arrangement, the supplier covers freight costs while the buyer arranges marine and war-risk insurance.

However, OCAC told the central bank that the present market conditions have made obtaining insurance coverage extremely difficult. The industry cited a recent tender by Pakistan State Oil as evidence of the emerging problem.

The letter revealed that “this challenge was recently reflected in the PSO spot tender floated on the Gallop platform on a C&F basis, where no bids were received for MS, HSD, and JP-1 cargoes.”

In response to the situation, the council proposed allowing imports temporarily on a CIF basis, where the supplier arranges both freight and insurance, including war-risk coverage. The industry believes this arrangement would enable suppliers to secure insurance more easily and ensure cargo movements continue despite the volatile regional environment.

OCAC also requested the SBP to grant a temporary general allowance for CIF imports of crude oil, refined petroleum products, base oil, and allied materials for up to two months.

The council stressed the urgency of the matter, warning that uninterrupted fuel availability is critical for the country’s economy and agriculture. The letter emphasized that “given the critical importance of ensuring uninterrupted fuel supplies ahead of the upcoming agricultural season and safeguarding national energy security, your kind consideration and early issuance of the necessary approval… is earnestly requested.”

According to OCAC, such a temporary policy relaxation would enable oil marketing companies and refineries to secure cargoes under prevailing market conditions and maintain steady fuel supplies across Pakistan.

It is pertinent to mention that OCAC’s request has reflected the growing concerns within the petroleum industry about the impact of geopolitical tensions on global shipping routes, insurance availability, and freight costs—factors that could significantly influence Pakistan’s fuel import logistics in the coming weeks.