Refining industry opposes another change to diesel pricing formula
Refiners warn frequent revisions to HSD pricing mechanism threaten USD 5-6 billion in planned investment
Haris Zamir
Business Editor
Experience of almost 33 years where started the journey of financial journalism from Business Recorder in 1992. From 2006 onwards attached with Television Media worked at Sun Tv, Dawn Tv, Geo Tv and Dunya Tv. During the period also worked as a stringer for Bloomberg for seven years and Dow Jones for five years. Also wrote articles for several highly acclaimed periodicals like the Newsline, Pakistan Gulf Economist and Money Matters (The News publications)
Pakistan's refining industry has opposed reports of another intervention in the high-speed diesel (HSD) pricing formula, warning that repeated changes to the mechanism could undermine refinery operations and discourage investment in the sector.
In a letter to the government, the industry said several changes had already been made to the HSD pricing mechanism in recent months, with the latest introduced on August 20, 2026.
The refiners expressed concern over reports that the government was considering reducing the HSD crack ceiling from USD 41.89 per barrel to USD 30 per barrel. Such a move could lower the retail price of HSD by about PKR 18-20 per liter, according to the industry.
The industry said the existing HSD pricing formula already does not reflect the premium prevailing in the international market. It said the Saudi Aramco premium for October was minus USD 2 per barrel, the same level reflected in the current HSD pricing formula, while actual cargoes were being offered and booked at premiums ranging between USD 15 and USD 20 per barrel.
"This is creating a significant challenge for the refineries in booking cargos for October," the industry said.
It warned that an abrupt reduction in the HSD 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.
USD 5-6 billion investment at stake
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 USD 5 billion to USD 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.
OMC margins unchanged since 2023
The industry also highlighted the issue of oil marketing company (OMC) 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 PKR 1.22 per 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.
The industry said it remained available for discussions with the government to explain its position and concerns over the reported changes to the HSD pricing mechanism.
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