Pakistan oil supply chain strained by rising global costs, forex pressure

Pakistan’s oil supply chain is coming under pressure from rising global energy costs and foreign exchange constraints, even as domestic fuel stocks remain stable, officials said Wednesday.

The concerns were raised during a meeting of a special cabinet committee on petroleum prices chaired by Finance Minister Muhammad Aurangzeb.

Industry representatives warned that higher international oil prices, coupled with increased insurance premiums, freight charges, and import costs, are straining financing arrangements for fuel imports.

Rising import costs

Oil marketing companies said their credit limits in local currency have not been revised, despite foreign exchange requirements more than doubling since the start of the US-Israel war on Iran.

The limits were originally set when global petrol and diesel prices hovered around $70 and $90 per barrel, respectively. Prices have since surged to over $132 for petrol and $190 for diesel, significantly increasing the cost of imports.

Import premiums have also risen sharply, climbing above $20 per barrel from about $5 to $6 previously, while longer shipping routes have driven up freight and insurance expenses.

Domestic supply stable

Despite these pressures, officials told the committee that Pakistan’s domestic fuel supply remains stable. Diesel stocks currently cover about 24 days of demand, while petrol reserves are described as comfortable, supported by steady imports and refinery output.

The meeting, attended by Petroleum Minister Ali Pervaiz Malik and other senior officials, reviewed supply conditions amid heightened volatility in global energy markets.

Authorities said one crude oil shipment is being offloaded, with another expected to arrive shortly at Karachi port. Additional cargoes are in transit, and further imports for March and April are being arranged.

Financing and monitoring measures

Officials noted that global petroleum markets remain tight due to regional tensions, with elevated prices and cargo premiums expected to persist in the near term.

The committee also discussed operational challenges linked to the increased size of letters of credit required for imports. Aurangzeb directed authorities to coordinate with the State Bank of Pakistan and commercial banks to explore measures such as temporary credit limit increases and consortium financing.

Meanwhile, the government has stepped up monitoring of fuel demand to prevent hoarding and ensure smooth distribution, particularly ahead of the upcoming Eid al-Fitr holidays and the harvest season.

Officials said oil marketing companies have been instructed to maintain readiness to meet demand, adding that no disruption in fuel availability is expected in the coming weeks.

The finance minister said the government’s priority remains ensuring uninterrupted fuel supplies while minimizing the impact of global price volatility on consumers.