Aurangzeb Warns Rising Oil Prices May Pressure Pakistan

Finance Minister Muhammad Aurangzeb informed a Senate panel on Thursday that increasing global oil prices, driven by tensions in the Middle East, could place upward pressure on petroleum product prices in Pakistan. He shared these views while briefing the Senate Standing Committee on Finance and Revenue, chaired by Senator Saleem Mandviwalla, as members examined the possible economic consequences of regional instability for Pakistan’s energy supply chain.

Later, the Ministry of Finance issued a clarification stating that the minister had not announced any decision to raise petroleum prices and that circulating reports claiming such an announcement were inaccurate.

During the discussion, Aurangzeb told lawmakers that international crude oil prices were on the rise and that the government was carefully monitoring developments in the region. He noted that an extended conflict in the Middle East could influence Pakistan’s inflation outlook, external financing position, current account balance and remittance inflows, even though the country is not a direct participant in the conflict.

The committee was also informed that the government has implemented austerity measures and energy conservation initiatives to create fiscal room for managing potential increases in global oil prices.

Aurangzeb added that a high-level committee established by the prime minister is convening daily to review the evolving situation and recommend policy measures aimed at ensuring uninterrupted fuel availability.

Petroleum Minister Ali Pervaiz Malik told the committee that Qatar had invoked force majeure amid the conflict, leading to a suspension of LNG shipments to Pakistan. He explained that an LNG cargo previously costing about $25 million is now being offered in the international market for nearly $100 million.

The committee was also briefed that Pakistan currently has five oil refineries in operation, most of which are considered outdated. Malik said Saudi Arabia continues to supply crude oil to Pakistan at discounted rates, but shipping expenses have surged dramatically—from roughly $700,000 to nearly $7 million per cargo.

Malik further explained that the recent Rs55 per litre increase in petrol and diesel prices was implemented to maintain continuous fuel imports. He noted that oil shipments typically take around 20 days to reach Pakistan and warned that without adjusting domestic prices, oil marketing companies might have halted imports due to rising procurement costs.

“If prices had not been raised promptly, companies would not have brought in fuel and the country could have experienced shortages,” he told the committee.

He added that petroleum prices are calculated based on average Platts benchmark rates and that the overall pricing formula has not been altered.

The minister also pointed out that the Strait of Hormuz has become congested due to the conflict, forcing vessels to take longer routes while insurance charges and risk premiums have climbed significantly.

Members of the committee expressed concerns over increases in petroleum prices on existing inventories and asked the government to clarify the factors behind such adjustments.

During the session, Senator Farooq H. Naek criticised the hike in fuel prices, arguing that the financial burden was ultimately being transferred to the public.

Officials further informed the committee that LPG imports from Iran are continuing and have even increased compared with previous levels, while there is currently no plan to raise domestic LNG tariffs.

The committee was also told that gas supplies are currently being prioritised for the fertiliser sector.

Aurangzeb and Malik added that the prime minister has instructed authorities to make every effort to avoid placing additional financial pressure on citizens.

They concluded by stating that the government will review international oil price trends before announcing the next revision in petroleum product prices on Friday.