Pakistan Petrol & Diesel Prices to Drop - Here’s the Latest Update

Oil Marketing Companies (OMCs) in Pakistan have voiced strong objections to the proposed ‘take and pay’ clause in Sales and Purchase Agreements (SPAs) with local refineries. They argue that this move would impose an unfair financial burden on them, disrupting market stability.

This controversy emerges at a time when petrol and diesel prices are expected to drop significantly later this week, providing potential relief to consumers.

Major Drop in Petrol and Diesel Prices Expected

According to the Oil Marketing Association of Pakistan (OMAP), fuel prices in Pakistan could see a notable decrease due to global market trends and inventory adjustments. The estimated reductions are:

Petrol price may drop by Rs12 per litre
High-speed diesel (HSD) may decrease by Rs8 per litre

These reductions follow fluctuations in international crude oil prices, which have been on a downward trend. Lower import costs and local inventory adjustments are also contributing factors.

OMAP has raised concerns over OGRA’s new ‘take and pay’ clause, which requires OMCs to purchase their allocated fuel quotas from local refineries or face financial penalties.

In a letter addressed to OGRA’s chairman, OMAP chairman Tariq Wazir Ali strongly criticized the clause, stating that it:

Shields refineries from financial risks while putting OMCs in a vulnerable position
Forces OMCs to buy fuel even when demand is low
Limits OMCs’ ability to import cheaper fuel when international prices are favorable

OGRA introduced this mechanism after complaints from refineries that excessive fuel imports were leading to underutilization of local refining capacity. However, OMCs argue that this measure benefits refineries at their expense.

How Will This Clause Affect the Market?

OMAP believes the ‘take and pay’ model will have serious consequences for Pakistan’s fuel market:

Financial Burden on Smaller OMCs
- Many smaller OMCs struggle with financial stability and may not be able to absorb losses from forced fuel purchases.
Reduction in Market Competition
- Larger refineries and a few major OMCs could dominate the sector, reducing market competition and limiting choices for consumers.
Increased Fuel Prices in the Long Run
- With OMCs restricted from importing cheaper fuel, prices could stay higher even when international rates decline.

OMAP also accused local refineries of manipulating supply to maximize profits. The letter highlighted that refineries:

Hold back fuel when prices are rising to force OMCs into importing expensive petroleum products.
Dump excessive stock when prices drop, causing losses for OMCs.

Additionally, cross-border fuel smuggling remains a major challenge. OMAP urged OGRA to strengthen regulations to:

Prevent refineries from exploiting price fluctuations
Curb illegal fuel smuggling, which distorts the market and makes locally sourced fuel less competitive

OMAP’s Demands & the Future of Fuel Pricing

OMAP has urged OGRA to reconsider the ‘take and pay’ clause, warning that it could destabilize the petroleum supply chain. They have called for a fair regulatory framework that protects both OMCs and consumers.

The dispute between OMCs and refineries could have long-term effects on Pakistan’s fuel pricing, distribution, and availability. Consumers may benefit from lower fuel prices in the short term, but regulatory decisions will determine how the market operates in the future.