Pakistan’s oil industry has raised serious concerns over the recent sharp reduction in diesel prices, warning that it could lead to inventory losses exceeding Rs100 billion. While the price cut has brought immediate relief to consumers, including farmers, transporters, and households, it has created significant financial pressure on oil marketing companies (OMCs) and fuel dealers.
According to industry officials, diesel prices dropped drastically from Rs520 to Rs385 per litre within a short period. As a result, companies that had imported fuel at higher prices are now forced to sell it at a loss of up to Rs135 per litre. These purchases were largely financed through bank loans, adding further strain on the sector’s financial stability.
Experts have described the situation as more than just a temporary setback, calling it a systemic shock that exposes weaknesses in Pakistan’s fuel pricing mechanism. The oil sector relies heavily on credit-based transactions, including post-dated cheques, to maintain operations. However, the sudden price drop has disrupted this cycle, leading to payment delays and increasing the risk of defaults.
Industry representatives also highlighted flaws in the pricing formula, which is based on the lowest international benchmark rather than actual procurement costs. They argue that this mismatch creates a gap between real expenses and regulated prices, especially during periods of high market volatility.
Additionally, officials pointed out that the fixed import premium does not reflect current global market conditions, further widening financial losses. They warned that continued pressure on liquidity could weaken the supply chain, potentially affecting fuel availability across the country.
The situation has drawn comparisons to Pakistan’s power sector, where similar financial imbalances contributed to the circular debt crisis. Industry experts caution that without timely reforms, the oil sector could face a similar challenge.
While the diesel price cut offers short-term relief to consumers, officials stress that long-term sustainability requires structural reforms to protect the energy supply system and ensure financial stability within the sector.
