Pakistan Faces Looming Petrol Supply Crisis as Oil Industry Warns of Emergency Stock Levels

ISLAMABAD: Pakistan’s oil industry has issued a stark warning to the federal government over an impending petrol supply crisis, saying the country’s rapidly shrinking motor spirit (MS) inventories have reached “emergency level” and could trigger widespread market disruptions unless urgent financial and regulatory measures are introduced.

In a letter addressed to the Minister for Petroleum, the Oil Companies Advisory Council (OCAC) expressed “serious concern regarding the increasingly fragile Motor Spirit supply situation,” warning that the country’s fuel supply chain is under mounting pressure due to critically low inventories, rising demand and increasing financing costs.

According to the industry body, Pakistan’s usable petrol stocks have declined to approximately 470,000 metric tonnes, equivalent to only 17 days of national consumption. With average monthly demand exceeding 700,000 metric tonnes, OCAC said existing inventories are substantially below the levels required to ensure uninterrupted fuel supplies.

Demand surge and financing pressures deepen crisis

OCAC warned that petrol consumption is expected to remain above 700,000 metric tonnes during July 2026, further tightening supplies at a time when oil marketing companies (OMCs) are already grappling with severe liquidity constraints.

The council attributed much of the financial strain to the recent increase in the Petroleum Development Levy (PDL), which has significantly raised the working capital required by OMCs to maintain mandatory fuel inventories. Elevated interest rates have further increased borrowing costs, making inventory financing increasingly expensive.

According to the letter, the industry is currently absorbing nearly Rs6.7 billion per month in inventory financing costs. Additionally, imported petroleum products remain subject to approximately Rs1 billion in pending Price Differential Claims (PDCs), further squeezing the cash flow of fuel suppliers.

Only two petrol cargoes due before month-end

The oil industry also warned that Pakistan’s fuel supply chain remains vulnerable over the remainder of July.

OCAC noted that only two motor spirit cargoes are scheduled to arrive between July 17 and July 31, leaving little buffer against unforeseen disruptions.

The council cautioned that any delays in vessel arrivals, port handling operations or inland transportation could quickly result in localized fuel shortages, particularly in northern regions where logistics are more challenging.

It stressed that with inventories already at critically low levels, even minor operational disruptions could have significant consequences for fuel availability across the country.

Refinery constraints increase import dependence

The letter further highlighted that domestic refineries are operating below optimal capacity due to reduced production of high-speed diesel (HSD), limiting overall refinery throughput.

As a consequence, Pakistan has become increasingly dependent on imported motor spirit to meet domestic demand, placing additional pressure on the country’s foreign exchange reserves and exposing the supply chain to international shipping and logistical risks.

The industry warned that continued reliance on imports, combined with weak domestic refining output, has further heightened vulnerabilities in Pakistan’s petroleum sector.

Industry seeks immediate relief measures

To prevent a supply disruption, OCAC urged the government to take immediate corrective action, including:

* Releasing Rs6.7 billion in outstanding Price Differential Claims.
* Temporarily relaxing mandatory fuel stockholding requirements to optimize available inventories.
* Avoiding regulatory measures that could further hinder fuel imports or disrupt supply operations.

The council argued that these steps would ease financial pressure on oil marketing companies and help stabilize the country’s petrol supply during a period of elevated demand.

Warning of serious supply disruptions

In its concluding remarks, OCAC warned that the combination of critically low inventories, increasing demand, higher levy-related financing requirements and elevated interest rates has placed Pakistan’s petroleum sector under exceptional strain.

“The current inventory position, the anticipated increase in demand and the financial constraints facing the industry, intensified by increases in exposure to levy financing and higher interest rates, have placed the sector under significant strain,” the letter stated.

The council warned that unless immediate remedial measures are implemented, Pakistan could face fuel supply disruptions that would affect transportation, commercial activity and the broader economy, particularly if scheduled imports or domestic distribution encounter unexpected delays.