Refiners oppose HSD pricing formula change, warn of investment risk

September 08, 2026 (MLN): Pakistan’s refining industry has raised strong objections to reports of a possible further revision to the high-speed diesel (HSD) pricing mechanism, cautioning that frequent changes could disrupt refinery operations and weaken investor confidence in the sector.

In a letter addressed to the government, refiners noted that the HSD pricing formula had already undergone several revisions in recent months, with the latest change taking effect on August 20, 2026.

The industry expressed particular concern over reports that the government may lower the HSD crack ceiling from $41.89 per barrel to $30 per barrel. According to the refiners, such a reduction could bring down the retail price of diesel by around Rs18–20 per litre.

Refiners maintained that the current HSD pricing formula does not adequately capture the premium being observed in the international market.

They noted that the Saudi Aramco premium for October stood at minus $2 per barrel, which is also incorporated into the existing pricing formula. However, actual cargoes were reportedly being offered and booked at premiums of $15–20 per barrel.

The industry said the significant gap between the formula and prevailing cargo premiums was already creating difficulties in securing October shipments.

According to the refiners, an immediate reduction in the HSD price could make high-premium cargoes commercially unviable. This could prompt refineries to cut throughput instead of raising production ahead of anticipated seasonal demand.

$5–6bn refinery investment at risk

The refining industry said it had repeatedly supported the government during difficult periods but warned that refiners could not continue absorbing the financial burden arising from repeated policy changes.

It highlighted planned investments of around $5–6 billion in refinery upgrading projects under the government’s Brownfield Refining Policy.

The industry stressed that investments of this magnitude require a stable policy framework, transparent pricing mechanisms and financial predictability.

It warned that continued changes to the HSD pricing mechanism could weaken the investment environment and threaten the viability of planned refinery modernization and upgrading projects.

OMC margins unchanged since 2023

The refiners also drew attention to oil marketing company (OMC) margins, stating that these were last revised in September 2023 and have remained unchanged despite continued inflation, higher operating and compliance expenses, and increased regulatory requirements.

The industry reiterated its demand for the immediate notification and implementation of a pending Rs1.22 per litre increase in OMC margins.

The refiners urged the government to ensure consistency and continuity in the fuel pricing mechanism, arguing that predictable pricing is essential for the long-term sustainability of the downstream petroleum sector.

The industry also expressed its willingness to engage with the government and present its concerns regarding the reported changes to the HSD pricing formula.

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