Deadlock Over New Oil Pricing Formula: Stakeholders Raise Concerns Over Fuel Supply Stability

Deadlock Over New Oil Pricing Formula: Stakeholders Raise Concerns Over Fuel Supply Stability, A significant controversy has erupted within Pakistan’s energy sector as Oil Marketing Companies (OMCs) and key industry stakeholders have voiced strong opposition to the government’s proposed “New Oil Pricing Formula.” The plan, which aims to shift towards a deregulated market, is facing backlash over fears of creating an uneven playing field and threatening fuel supply security.

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According to reports gathered by Taazataren, the government intends to move away from the current centralized pricing mechanism to a market-driven model. Under the new proposal, OMCs would have more autonomy in setting prices based on their individual costs and exchange rate fluctuations. However, the industry argues that without a robust regulatory framework, this could lead to “predatory pricing” where larger players might crush smaller companies, eventually leading to a monopoly.

The Oil Companies Advisory Council (OCAC) has formally communicated its reservations to the Ministry of Energy. Their primary concern is that the new formula does not adequately account for the high costs of maintaining strategic reserves and the logistical challenges of supplying fuel to remote areas. Industry experts warn that if the formula is implemented in its current form, it could lead to frequent fuel shortages as companies might hesitate to import oil during periods of price volatility.

Furthermore, there is a lack of clarity regarding the Inland Freight Equalization Margin (IFEM). Stakeholders believe that removing this margin would result in significantly higher petrol prices in cities far from ports and refineries, such as Peshawar and Quetta, compared to Karachi.

The government, on the other hand, maintains that deregulation is essential to attract foreign investment and reduce the fiscal burden on the state. High-level negotiations are expected to continue this week as the administration seeks a middle ground to avoid a full-blown crisis in the energy supply chain.