Petrol, Diesel Prices to Skyrocket in Pakistan Before Next Fortnightly Update

Pakistan is preparing to shift to weekly petroleum price revisions and compensate oil marketing companies for surging insurance and freight costs as the closure of the Strait of Hormuz strains global energy trade and inflates import bills.

A summary outlining the measures is being submitted to the federal cabinet’s Economic Coordination Committee for urgent approval, reported Dawn.

Officials estimate that price differentials have already reached Rs. 45-50 per liter for diesel and Rs. 25-26 for petrol during the first week of the disruption, with risks of further increases if supply constraints persist.

The move to weekly pricing, from the current fortnightly adjustment, is designed to pass through higher international costs more quickly and prevent large financial gaps from building up on company balance sheets.

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The proposals aim to shield state-run and private oil firms from mounting financial pressure and ensure uninterrupted fuel supplies.

Insurance premiums for oil cargoes have jumped from about $30,000 per vessel to nearly $400,000, according to reports. Freight rates have surged past $4 million per shipment, compared with roughly $900,000 before the crisis. Import premiums for petroleum products have also widened sharply, eroding margins for oil marketing companies (OMCs) and refiners.

Under the proposed mechanism, the government would compensate companies for extraordinary costs linked to insurance, freight and higher import premiums. Officials warned that without relief, OMCs could scale back imports or declare force majeure, threatening domestic fuel availability.

State-run Pakistan State Oil has already floated precautionary tenders for petrol and diesel sourced outside the Gulf route. The company is also seeking alternative supplies through the Red Sea, including potential shipments from Saudi Arabia, to mitigate risks tied to Gulf shipping lanes.

Authorities say the country currently holds more than 500,000 tons each of petrol and diesel, equivalent to nearly four weeks of cover, but remain concerned about sustained trade bottlenecks.

The cabinet committee, chaired by Finance Minister Muhammad Aurangzeb, is reviewing contingency measures to maintain liquidity in fuel markets and safeguard supply chains amid continued volatility in global energy corridors.