Fuel Crisis Risk Grows Amid Policy Dispute

An emerging policy dispute within federal decision-making circles may heighten the risk of a fuel supply crisis, particularly at a time when Pakistan is already navigating supply constraints linked to ongoing geopolitical tensions in the Middle East.

Sources indicate that a committee constituted by Shehbaz Sharif to review the existing petroleum pricing mechanism has triggered concerns within the oil industry. The committee, reportedly led by a former petroleum minister, proposed delinking domestic petroleum pricing from international market benchmarks. Under the current framework, prices are adjusted periodically in alignment with global oil trends.

The proposal has faced strong opposition from industry stakeholders, who argue that disconnecting domestic pricing from international costs would disrupt the commercial viability of oil imports and supply chains. At present, Ali Pervaiz Malik and industry participants have managed to maintain stable fuel supplies despite external pressures.

Compounding the situation, Russia has announced a halt to oil shipments starting April 1, potentially intensifying supply challenges. However, diplomatic engagement led by Ishaq Dar has secured approval from Iran for the transit of 20 oil cargoes to Pakistan, providing temporary relief.

The Oil and Gas Regulatory Authority (OGRA) has conducted consultations with industry stakeholders regarding the proposed pricing changes. The response has been unanimously critical, with industry representatives warning that abrupt policy shifts could destabilize supply chains, discourage imports, and undermine investor confidence.

Industry experts emphasize that petroleum supply operations are inherently dependent on commercial sustainability. Any misalignment between international procurement costs and controlled domestic pricing may lead to reduced imports, supply disruptions, and financial strain on oil marketing companies.

Additionally, unresolved structural issues—including recovery of input sales tax and compensation for exchange rate losses—continue to impact the sector’s financial health. Stakeholders caution that introducing further policy distortions without addressing these underlying concerns may exacerbate systemic risks.

Concerns have also been raised regarding potential inefficiencies in targeted subsidy mechanisms, particularly those reliant on technological platforms. Industry participants highlight risks related to implementation complexity, misuse, and administrative inefficiencies.

Simultaneously, a parallel energy challenge is emerging in the form of a potential Liquefied Natural Gas crisis, as LNG terminal operations face disruption. One terminal has already been shut down, while the second—currently supplying approximately 100 mmcfd—is also scheduled for closure. This is expected to constrain gas availability for power generation, especially during the high-demand summer period.

Rising LNG demand from power plants, coupled with escalating LNG prices approaching furnace oil parity, further complicates the energy outlook. These developments collectively underscore the urgency of policy stability, supply chain resilience, and coordinated regulatory action to mitigate the risk of a broader fuel crisis.