Refinery margins slashed further

Revision, following consultations with industry, leads to reduction in diesel prices

ISLAMABAD:

Oil refineries have agreed to slash their margins on high-speed diesel (HSD) by another $3.9 per barrel at the government's request, helping reduce diesel prices by Rs7.69 per litre on October 19.

The decision came following consultations held by Minister for Petroleum Ali Pervaiz Malik with the management of five refineries – Attock Refinery, National Refinery, Cnergyico Pk, Pakistan Refinery and Pak-Arab Refinery. The minister chaired a meeting with refinery executives on Monday, where the industry agreed to make further concessions to provide relief to consumers despite financial pressures arising from international crude oil prices.

Following consultations, the federal cabinet approved a revised HSD pricing formula, fixing the maximum allowable refinery crack at $38 per barrel while maintaining the minimum floor at $11.33 per barrel. The latest concession of $3.9 per barrel is in addition to the earlier reductions in refinery margins.

Responding to a query from The Express Tribune, Cnergyico Pk vice chairman said "the refining sector has made unprecedented contributions during the ongoing crisis, despite facing significant financial challenges".

"The refining sector has played an unprecedented role throughout this crisis, something no other industry has done in the past. Whether it is providing price relief to consumers, supplying discounted fuel for Hajj flights or supporting our defence forces through fuel supplies at reduced prices, the refineries have stepped forward in the national interest," he said.

He pointed out that the industry had continued to absorb substantial financial pressure as the existing pricing mechanism did not fully account for the actual cost of crude oil procurement. "The realised crack on diesel remains low because the pricing mechanism does not fully account for the cost of crude oil purchased at international market prices," he added.

The vice chairman also called on the government to examine other sectors that had increased prices of goods and services on the pretext of higher fuel costs. "These sectors should now pass on the benefit of lower diesel prices to consumers instead of keeping the additional margins resulting from earlier price increases."

He underscored that the refining industry's contribution should be viewed in the broader context of national energy security, particularly when refineries were ensuring fuel supplies to essential sectors despite financial constraints.

According to an official communication issued by the Petroleum Division to the Oil and Gas Regulatory Authority (Ogra) on October 19, the federal cabinet approved a revised diesel pricing mechanism following consultations. Under the new formula, the maximum diesel crack will be determined on the basis of the average crack spread over the preceding seven working days, subject to a ceiling of $38 per barrel. The minimum floor of $11.33 per barrel will remain unchanged.

The cabinet also approved the continuation of the revised crude-based pricing mechanism for another three months. However, the arrangement may be reviewed earlier if geopolitical conditions improve and international petroleum prices drop sharply. All other parameters of petroleum product pricing will remain unchanged.