Govt caps HSD crack at $41.89, crings back crude-based pricing

August 20, 2026 (MLN):  The government has approved a revised crude-based pricing mechanism for High-Speed Diesel (HSD), setting a $41.89 per barrel ceiling on the HSD crack and a $11.33/bbl floor, as part of measures to address elevated crude oil, freight and insurance costs amid the Iran-US war.

The Federal Cabinet approved the Petroleum Division’s proposal on 19 August 2026, with the revised mechanism to be implemented by the Oil and Gas Regulatory Authority (OGRA) immediately. The mechanism will remain in place for two months, although the government may review it earlier if geopolitical conditions improve and international oil prices decline rapidly.

HSD to return to crude-based pricing

Under the revised mechanism, the HSD price will be determined using a seven-working-day rolling average of Dubai Crude Oil prices, published by Platts, as the base price for OGRA’s daily pricing.

The monthly Aramco crude oil premium/discount for Arab Extra Light for Asia will also be added to the calculation. For August 2026, the applicable premium is a discount of $1.00/bbl.

The government has fixed the HSD crack at a maximum of $41.89/bbl and a minimum of $11.33/bbl. The mechanism is based on the weighted average crack of HSD, Motor Spirit (MS) and High Sulphur Furnace Oil (HSFO) over the last four financial years and nine months of FY2025-26.

According to the approved mechanism, anchored to help ensure the historic weighted average crack  of $6.16/bbl, while the corresponding seven-working-day average crack will be used to determine the maximum allowable crack, subject to the $41.89/bbl ceiling.

Additional allowances for war-related crude costs

To account for disruptions and higher logistics costs during the war, crude imported from outside the Gulf region will carry an additional premium of up to $10/bbl over the Gulf-region benchmark. This additional cost will be reimbursed through the Inland Freight Equalization Margin (IFEM).

The government will also provide an $8/bbl allowance for freight and insurance costs on crude vessel imports from the Gulf region.

For crude imported from outside the Gulf region, an additional freight allowance of up to $5/bbl, over and above the Gulf-region allowance, will also be reimbursed through IFEM. Such imports will require approval from the National Coordination and Management Council (NCMC).

PSO HSD imports to receive differential reimbursement

For HSD imports by Pakistan State Oil (PSO) during the relevant seven-working-day pricing period, the weighted average of incidentals and customs duty on PSO cargoes that have been completely discharged and whose volumes are available for sale will be used.

If PSO has not imported HSD during the previous seven working days, incidentals and customs duty will be determined using whichever is lower between the applicable costs of the last KPC cargo, with 7 March 2026 identified as the pre-war lowest-value reference, and the calendar-year-to-date average.

This provision will apply with effect from 17 July 2026.

The government will also reimburse through IFEM any differential arising for PSO from the change in the HSD pricing mechanism, based on projected imported HSD consumption of up to 5,000 tonnes per day.

MS pricing mechanism largely unchanged

For Motor Spirit (MS), the government has retained the Platts-based pricing mechanism.

The FOB price will continue to be calculated using a seven-working-day rolling average of Platts Arab Gulf assessments for MS 92 RON.

Where PSO imports MS during the relevant seven-working-day period, the weighted average of actual premiums, incidentals and customs duty of completely discharged cargoes will be applied.

If no PSO MS import takes place during the period, the calendar-year-to-date average of premiums, incidentals and customs duty will be used.

Where PSO enters into a long-term supply arrangement with a foreign supplier, such as OQ Trading Oman, the agreed premium may be used where there has been no import during the preceding seven working days. The incidentals and customs duty from the latest OQ Trading supply will also apply if lower once available.

Emergency MS procurements involving costs beyond the approved parameters will require specific approval from the NCMC or another designated forum.

The Cabinet-approved daily MS pricing mechanism of 17 July 2026 will otherwise remain unchanged.

OGRA to publish fuel prices daily without government approval

A major change under the new mechanism is that OGRA will calculate and publish maximum ex-depot prices for MS and HSD on its website every day without seeking approval from the Federal Government or Prime Minister.

The DG Oil Office and all chief secretaries will be informed of each publication in a timely manner.

For greater transparency, OGRA will also publish the relevant daily Platts announcements for MS 92 RON, HSD 10 ppm and Dubai Crude Oil on its website.

HSD imports restricted to PSO

Under the approved arrangement, HSD imports will be allowed only through PSO.

For MS, OGRA will allocate imports to oil marketing companies through its PRM according to their market share for the previous month. The minimum import parcel will be 10,000 tonnes, with a tolerance of plus or minus 5%.

OMCs failing to meet their MS import commitments, delaying delivery beyond the agreed month, or defaulting on committed refinery upliftment beyond the 5% tolerance will be disqualified from further import allocations for three months.

A repeat defaulter will face a six-month disqualification from subsequent import allocations.

SKO and LDO prices to be determined weekly

The pricing of Superior Kerosene Oil (SKO) and Light Diesel Oil (LDO) will be determined weekly by OGRA and refineries.

The calculation will use a five-day Monday-to-Friday average of the mean of Arab Gulf Platts assessments, without requiring approval from the Federal Government or Prime Minister.

Other pricing parameters remain unchanged

All other existing parameters will continue to apply, including:

• Exchange-rate adjustment
• Refinery Regulatory Duty (RRD)
• Research Octane Number (RON)
• HSD sulphur penalties
• IFEM settlement mechanism

Fuel prices will continue to be announced daily by OGRA, except on Platts pricing holidays affecting Arab Gulf Platts publication and gazetted holidays in Pakistan.

Prices notified on Friday will remain effective from Saturday through Monday because Platts does not publish prices over the weekend.

Petroleum levy ceiling retained at Rs80 per litre

The petroleum levy (PL) on both HSD and MS will remain within the existing upper limit of Rs80 per litre.

Within this ceiling, the applicable petroleum levy rates for the fiscal year will be communicated by the Finance Division to the Petroleum Division for notification.

OGRA will consult the Finance Division if any revision is required during the year, and the rates cannot be revised without Finance Division’s consent.

The Petroleum Division has directed OGRA to take immediate action to implement the Cabinet-approved mechanism and inform all relevant stakeholders.

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