The Strait of Hormuz closure is severely disrupting global trade and petroleum pricing. Consequently, Pakistan is rapidly deploying emergency measures to keep its markets liquid. Over 20 percent of global oil cargoes remain stuck inside the strait. Therefore, the global market faces a massive shortage of ships for diesel. To counter this bottleneck, the federal government is shifting to weekly petroleum price revisions. Furthermore, authorities plan to enforce fuel conservation measures. These measures include mandatory work-from-home policies across both public and private sectors.
Soaring Freight & Insurance Costs
Logistics costs have exploded overnight. Insurance premiums for oil companies surged from $30,000 to an astronomical $400,000 per ship. Additionally, freight rates skyrocketed from $900,000 to over $4 million. As a result, the price gap widened drastically during the first week of the crisis. Diesel experienced a gap of Rs. 45-50, while petrol faced a Rs. 25-26 difference.
Oil Marketing Companies (OMCs) cannot absorb these exponential costs. Without immediate intervention, OMCs possess sufficient grounds to declare force majeure and halt imports completely. Therefore, officials submitted a summary to the Economic Coordination Committee (ECC). This summary outlines a mechanism to compensate OMCs for the elevated insurance and import premiums officially. Moreover, shifting from fortnightly to weekly price revisions will recover true supply costs from consumers continuously. This rapid revision prevents a massive fiscal bulge on both the OMCs and the government.
Securing Alternative Supply Chains
Currently, Pakistan faces no immediate fuel shortage. The country holds over 500,000 tonnes of both petrol and diesel. These stocks provide 26 and 25 days of cover, respectively. However, the government is strictly managing current reserves. The Oil and Gas Regulatory Authority (Ogra) and OMCs officially stopped unlimited fuel supplies to retailers. Instead, stations now receive fuel based strictly on their 8-month historical sales patterns. This quota directly prevents market hoarding.
Meanwhile, Pakistan heavily relies on long-term diesel supplies from Kuwait. Unfortunately, all those cargoes remain trapped behind the closed strait. In response, Pakistan State Oil (PSO) proactively launched import tenders for petrol and diesel outside the Strait of Hormuz. Furthermore, Pakistan requested Saudi Arabia to provide immediate oil supplies through an alternative Red Sea route.
Petroleum Pricing: Daily Monitoring & National Action Plan
Finance Minister Muhammad Aurangzeb currently chairs a newly created 18-member cabinet committee. This committee meets daily to monitor global maritime corridors, stock levels, and daily consumption patterns. Additionally, the participants closely review the liquefied natural gas (LNG) and liquefied petroleum gas (LPG) markets. Officials are actively exploring alternative regional energy hubs in the Red Sea and Gulf regions to maintain refinery operations and supply resilience.
The committee issued strict directives to prevent the hoarding, diversion, and smuggling of petroleum products. Today, provincial chief secretaries are joining the committee to deliberate on the final summary. Together, they will finalize a comprehensive, coordinated national action plan to safeguard Pakistan’s energy security.
