Pakistan’s refining industry has opposed any further interventions in the high-speed diesel pricing formula, warning that repeated changes to the mechanism can undermine refinery operations and discourage investment in the sector.
In a letter to the government, industry representatives said several changes had already been made to the diesel pricing mechanism in recent months, with the latest introduced on Aug. 20, 2026. Expressing concerns over reports the government was considering reducing the diesel crack ceiling from $41.89/barrel to $30/barrel, they noted such a move could lower diesel’s retail price of HSD by about Rs. 18-20/liter.
However, the letter stressed, the existing pricing formula already failed to reflect the premium prevailing in the international market. It said the Saudi Aramco premium for October was minus $2 per barrel, the same level reflected in the current pricing formula, while actual cargoes were being offered and booked at premiums ranging between $15-20/barrel.
“This is creating a significant challenge for the refineries in booking cargos for October,” it said, warning any abrupt reduction in the diesel price could make the booking of high-premium cargoes uneconomical for refiners, potentially forcing them to reduce throughput rather than increase production ahead of expected seasonal demand.
The refining industry said it had consistently supported the government during challenging periods but could not be expected to repeatedly absorb the financial impact of policy interventions. It pointed to planned investments of approximately $5-6 billion in refinery upgrading projects under the government’s Brownfield Refining Policy. Investments of that scale require policy consistency, predictable pricing and financial stability, the industry said.
The refiners argued that frequent changes to the pricing mechanism could undermine the investment environment and affect the viability of planned modernization and upgrading projects.
The industry also highlighted the issue of oil marketing company margins, saying they were last revised in September 2023 and had remained unchanged despite persistent inflation, rising operating and compliance costs and increased regulatory requirements. The industry renewed its request for the government to immediately notify and implement a pending increase of Rs. 1.22/liter in OMC margins.
The refiners urged the government to maintain consistency and continuity in the fuel pricing formula, saying predictable pricing was essential for the sustainability of the downstream petroleum sector. They said they remained available for discussions with the government to explain their position and concerns over the reported changes to the diesel pricing mechanism.