Pakistan’s oil refineries protest new petrol pricing formula, warning of Rs49 a litre burden and risk to $6 billion upgrades
Pakistan’s four oil refineries have demanded the immediate withdrawal of the government’s revised petrol pricing mechanism, saying it imposes a burden of Rs49.02 per litre on locally produced petrol and threatens billions in planned refinery upgrades.
Pakistan’s four oil refineries have formally protested against the federal government’s revised petrol pricing mechanism, warning that it imposes a financial burden of Rs49.02 on every litre of locally produced petrol and puts at risk multibillion-dollar investments planned under the country’s Brownfield Refinery Policy. In a joint letter dated 2 November to Petroleum Minister Ali Pervaiz Malik, the refineries demanded the immediate withdrawal of the new formula, which took effect on 31 October, saying it was imposed without prior consultation with the industry.
The dispute turns on how the ex-refinery price of petrol is now calculated. Under the revised mechanism, approved by the federal cabinet on 30 October, the import price of petrol is set on the basis of the actual cost of the relevant Pakistan State Oil (PSO) import cargo, or, where that is unavailable, the premium, incidental expenses and customs duty of the last available cargo. For domestic refineries, those same three components are temporarily frozen at their pre-war levels of 7 March 2026 for 30 days, and any difference between the import price and the resulting ex-refinery price must be surrendered by the refineries through the petroleum levy account, with the benefit passed on to consumers through lower pump prices.
The refineries say the arithmetic works heavily against them. Attock Refinery Limited chief executive Adil Khattak put the cost of using pre-war premiums and incidentals at about Rs35 per litre, with roughly another Rs14 per litre diverted from their customs-duty recovery towards reducing the petroleum levy, bringing the total adverse impact to approximately Rs49 per litre. The joint representation argued that the measure comes at a time when crude procurement, freight, insurance and financing costs have risen sharply amid the US-Iran conflict, and described the change as a departure from the government’s previous practice of consulting refineries before altering the petroleum pricing formula.
The letter also questioned how long the arrangement will last. The refineries pointed to a mismatch between the federal cabinet’s direction, which provided for pre-war refinery pricing components to remain applicable for 30 days, and the petroleum levy notification, which required the differential to be surrendered until further orders. That uncertainty, they argued, makes it harder to plan operations and investment at a time when the industry says it has committed up to $6 billion to modernise the country’s ageing refining infrastructure.
The government, for its part, has presented the mechanism as a consumer-protection measure during wartime price shocks. Addressing a joint news conference with Information Minister Attaullah Tarar on Monday, Petroleum Minister Malik said cooperation from local refineries had allowed petrol to remain around Rs15 per litre cheaper than international market rates, with refineries absorbing a burden of roughly Rs15 billion a month. He said petrol import premiums stood at around $5 a barrel before the conflict, rose to $20 a barrel, and reached $25 to $30 a barrel in subsequent PSO tenders as regional conditions deteriorated.
Malik also argued that the refineries could afford the arrangement, saying they had earned more profit in three months of the Iran-US war than in an entire year, helped by increased throughput. He added that about 70 per cent of Pakistan’s petrol requirement comes from the international market, while locally produced petrol accounts for only a small share, and said the government had secured gas supplies for November while working on supplies for December and January.
The minister further disclosed that a Pakistan-bound LNG cargo ship was attacked before it entered the Strait of Hormuz, without naming those responsible, underlining the supply risks the government says it is managing. Meanwhile, the Oil and Gas Regulatory Authority (OGRA) cut petrol by Rs3.40 to Rs374.51 per litre and high-speed diesel by Rs7.76 to Rs395.20 per litre for 3 November, under the daily price-fixation mechanism introduced in July, which replaced a weekly system and, before the conflict, fortnightly price-setting.
What happens next will depend on whether the government holds the line or softens the formula. If the refineries’ demand for withdrawal is rejected, the industry could press its case through the courts or through the Brownfield policy framework, where upgrade commitments are tied to pricing predictability. If the government revises the mechanism, consumers could see some of the current relief unwind. Either way, the row exposes a deeper tension: the state is using refinery margins as a shock absorber for wartime fuel prices, while the refineries say that doing so without consultation undermines the very investments meant to reduce Pakistan’s dependence on imported fuel.
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