KARACHI: The oil industry has urged the government to evaluate any proposed inventory gain recovery mechanism within the broader context of the full inventory risk cycle, mandatory stockholding obligations, market stability considerations and the long-term sustainability of the country’s petroleum supply chain.
It expressed concerns over recent media reports indicating that a government committee is reviewing the country’s cross-subsidy framework and examining the potential recovery of inventory gains arising from fluctuations in international oil prices.
In a letter to the Federal Secretary, Ministry of Energy (Petroleum Division), the Oil Companies Advisory Council (OCAC) emphasised that any policy intervention relating to inventory gains should be guided by principles of fairness, regulatory consistency and long-term energy security.
According to the industry body, inventory valuation gains realised during periods of rising international oil prices are often temporary and may be offset by subsequent market corrections. The OCAC noted that inventory gains and losses form part of a single risk cycle associated with maintaining petroleum stocks and should not be viewed in isolation.
The industry highlighted its role in ensuring uninterrupted fuel supplies during recent geopolitical disruptions that affected global energy markets. Oil marketing companies (OMCs) are required under Pakistan’s regulatory framework to maintain mandatory inventories equivalent to 20 days of stock cover. These inventories, the industry noted, are maintained to support national energy security rather than for speculative or commercial purposes.
Pakistan’s petroleum supply chain remains heavily exposed to international market volatility, with approximately 80 per cent of crude oil requirements, 70 per cent of motor gasoline and 30 per cent of high-speed diesel sourced from global markets. As a result, inventory valuation fluctuations are considered an inherent feature of operations in the sector.
The OCAC further pointed to market expectations of softer global demand, easing freight rates and declining geopolitical risk premiums during the July-September 2026 period, factors that could contribute to future price corrections and potentially reverse current inventory gains.
The industry cautioned that recovering inventory gains during periods of price increases, without a corresponding mechanism for inventory losses, could discourage adequate stockholding and undermine efforts to strengthen national energy security.
The letter also highlighted broader financial challenges facing the sector, including outstanding price differential claim (PDC) recoveries of approximately Rs66.7 billion, stagnant OMC margins, rising operating costs, increasing compliance obligations and ongoing policy uncertainty.
The OCAC urged policymakers to evaluate any proposed inventory gain recovery mechanism within the broader context of the full inventory risk cycle, mandatory stockholding obligations, market stability considerations and the long-term sustainability of Pakistan’s petroleum supply chain.
The industry requested further engagement with relevant authorities to ensure that future policy decisions support both energy security objectives and a stable operating environment for the petroleum sector.
