Pakistan plans emergency measures to stabilise fuel market amid Strait of Hormuz disruptions

ISLAMABAD: The Pakistani government is preparing a set of emergency steps to stabilise the petroleum market after trade movements slowed due to the closure of the Strait of Hormuz, officials said on Wednesday.

Authorities are considering several measures, including shifting petroleum price adjustments from a fortnightly schedule to weekly revisions, compensating oil companies for rising insurance and import costs, and introducing energy-saving steps such as encouraging work-from-home arrangements in both the public and private sectors.

A summary outlining these proposals is expected to be presented to the federal cabinet’s Economic Coordination Committee (ECC) for urgent approval as fuel prices show signs of sharp increases.

Meanwhile, Pakistan State Oil (PSO), with government approval, has issued two tenders each for petrol and diesel imports through routes that bypass the Strait of Hormuz. The move is described as a precautionary step even though the country currently holds relatively high fuel reserves.

Officials say petrol and diesel stocks both exceed 500,000 tonnes, enough to cover about 26 days of petrol demand and 25 days of diesel consumption. Pakistan has also approached Saudi Arabia to explore the possibility of transporting oil supplies via an alternative route through the Red Sea.

The federal government has instructed provincial chief secretaries to attend a meeting of an 18-member cabinet committee on Thursday to monitor petroleum prices and consider additional measures, including potential energy conservation initiatives.

While petrol imports remain relatively secure, officials warn that diesel supplies are more vulnerable because Pakistan relies heavily on long-term shipments from Kuwait that pass through the Strait of Hormuz. In addition, more than one-fifth of global oil cargoes are reportedly stranded in the strait, creating a shortage of vessels available to transport diesel.

Rising operational costs are also putting pressure on oil companies. Insurance premiums for oil shipments have reportedly jumped from around $30,000 to about $400,000 per vessel. Import premiums and freight rates have also surged, with shipping costs climbing beyond $4 million compared with less than $900,000 before the crisis.

Officials say these escalating expenses make it difficult for oil marketing companies and refineries to absorb the additional burden. The government is therefore preparing a compensation mechanism to ensure companies continue importing fuel and maintaining supply chains.

The government also plans to introduce weekly fuel price adjustments to quickly reflect changing costs and avoid large financial gaps for both the government and oil companies. According to one official, the price difference created by the crisis has already reached about Rs45-50 per litre for diesel and around Rs25-26 per litre for petrol during the first week alone.

Despite complaints from some fuel dealers about limited supplies, authorities insist there is no shortage of petroleum products nationwide. The Oil and Gas Regulatory Authority (Ogra) and oil marketing companies have temporarily limited deliveries to retailers based on their average sales over the past eight months to prevent hoarding and maintain stable distribution.

Ogra said the measure is a routine supply-management practice during periods of extreme price volatility and reassured the public that fuel stocks remain within required levels.

Separately, Finance Minister Muhammad Aurangzeb chaired a meeting of the cabinet committee tasked with monitoring petroleum prices. Participants reviewed the country’s reserves of crude oil and refined fuels, including petrol, diesel, aviation fuel and liquefied petroleum gas (LPG), along with consumption trends and days of supply.

Officials also discussed global energy market developments, including fluctuations in benchmark oil prices, rising shipping and insurance costs, and changes in international maritime routes. The committee noted that the global energy situation remains uncertain due to tensions surrounding the Strait of Hormuz.

Members reviewed supply conditions for liquefied natural gas (LNG) and LPG as well, acknowledging that disruptions to shipping routes could also affect LNG transport worldwide.

The government is exploring contingency plans such as strengthening cooperation with international partners and identifying alternative supply routes. These efforts include potential arrangements through energy hubs and ports in the Red Sea and Gulf regions to ensure refineries continue operating smoothly.

The committee also discussed energy conservation initiatives as part of broader planning to manage demand while maintaining market stability.

Officials stressed that although fuel supplies remain stable for now, efficient energy use will help the country stay prepared if global uncertainties persist.

Finance Minister Aurangzeb said maintaining uninterrupted petroleum supplies remains the government’s top priority and will guide all policy decisions. Authorities also pledged to prevent hoarding, diversion or smuggling of fuel during the current volatility.

Provincial chief secretaries are expected to attend the committee’s next meeting to review the final proposals and consider a nationwide action plan aimed at safeguarding Pakistan’s energy supply.