Petroleum industry divided over daily fuel pricing as dealers back reform, pump owners oppose it

ISLAMABAD: Pakistan’s petroleum industry remains divided over daily fuel pricing, with petroleum dealers joining supporters of the reform, pump owners maintaining their opposition and oil marketers continuing to raise concerns over implementation and the fuel supply chain.

Amid the differing positions, the Petroleum Division has invited representatives of the All Pakistan Petrol Pump Owners Association (APPO) to meet Federal Minister for Petroleum Ali Pervaiz Malik on Tuesday to discuss concerns arising from the revised pricing mechanism.

The association has already rejected the new framework and warned of a nationwide strike if it is not withdrawn.

The latest support for the reform came from the Pakistan Petroleum Dealers Association (PPDA), which endorsed the revised pricing mechanism during a meeting with the petroleum minister on Monday, becoming the latest stakeholder to back the government’s move towards daily petroleum price notifications.

During the meeting, the minister informed the delegation that the revised mechanism is based on a seven-day rolling average of international petroleum prices.

He said the previous weekly pricing system also relied on a seven-day average, with the revised framework changing only the frequency of price notifications to improve transparency, better reflect movements in international prices and discourage hoarding and market manipulation.

The PPDA assured the minister of its support for the reform but requested that petroleum dealers be consulted while operational rules governing the relationship between oil marketing companies (OMCs) and dealers are framed.

The delegation also sought an increase in dealers’ margins to 8%, saying they had not been revised despite rising operating costs.

The minister assured the delegation that its concerns would be considered and arranged a meeting between PPDA representatives and the Oil and Gas Regulatory Authority (OGRA) on Tuesday to discuss dealer margins and other operational matters.

The delegation also appreciated the government’s management of petroleum supplies during the Strait of Hormuz crisis, saying Pakistan maintained uninterrupted fuel availability despite regional uncertainty.

PPDA Chief Adviser Malik Khuda Baksh said that while several neighbouring countries faced law and order problems due to petroleum shortages, Pakistan ensured smooth fuel supplies through timely government measures.

However, the Oil Marketing Association of Pakistan (OMAP) has continued to oppose the revised mechanism, arguing that the policy was introduced without meaningful consultation with OMCs, petroleum dealers, refineries, pipeline operators, transporters and other stakeholders.

OMAP warned that dealers would be required to sell fuel at the daily price notified by OGRA, regardless of the price at which inventories were purchased. It said this would expose them to daily inventory gains or losses and put regulated dealer margins at risk.

The association said dealers could reduce inventories from the usual three to four days to nearly one day’s stock to minimise financial exposure, increasing delivery frequency, logistics costs and the risk of fuel shortages.

It added that petroleum products transported by road and pipeline, as well as imported cargoes that typically take 10 to 15 days to reach the retail market, could pass through multiple daily price revisions. This could create uncertainty over inventory valuation and the protection of regulated margins.

OMAP urged the government to explain how the regulated margins of dealers and OMCs would be protected under the revised framework.

It warned that, without adequate safeguards, the policy could increase working capital requirements, discourage petroleum imports, create commercial disputes, weaken investor confidence and ultimately threaten uninterrupted fuel supplies.

Earlier, the Oil Companies Advisory Council (OCAC), representing refineries and major OMCs, welcomed the introduction of daily petroleum pricing and assured the Ministry of Petroleum and OGRA of its full support in implementing the reform.

It described the move as an important step towards deregulation, which has remained under discussion for nearly two decades.

A senior refinery official also supported the reform, saying the refining industry backed the government’s objective of creating a more transparent and market-based petroleum pricing system.

The PPDA delegation comprised Chief Adviser Malik Khuda Baksh, Raja Waseem Kayani, Chaudhry Zafar Elahi, Babar Ali Chaudhary and Chaudhry Faisal Arif.