Pakistan Fuel Stocks: Comfortable Levels Despite Middle East Tensions & Price Hike

Islamabad – Pakistan’s finance ministry affirmed on Monday that the country maintains a “comfortable” level of fuel stocks for March, even as consumers grapple with recently increased petrol and diesel prices. The reassurance came during a daily review of the energy sector convened by Finance Minister Muhammad Aurangzeb, prompted by ongoing tensions in the Middle East and their potential impact on global supply chains.

The government announced a Rs55 per litre hike in the prices of both petrol and high-speed diesel last week, citing the escalating conflict in the Middle East as a key driver. This increase followed a period of uncertainty regarding fuel availability, with concerns mounting over potential disruptions to crucial energy supply routes. The price adjustments, while painful for consumers, were presented as a necessary measure to stabilize the market and prevent potential shortages.

Inventory and Supply Outlook

According to a press release from the Finance Ministry, the committee meeting, held at the Finance Division in Islamabad, was briefed on the national inventory of crude oil and refined petroleum products, ongoing import arrangements, and supply chain logistics. Officials indicated that current fuel reserves are sufficient to meet demand through March, with coverage extending to mid-April based on existing cargo plans and supply arrangements. Efforts are underway to extend this coverage further towards the end of April.

The committee emphasized the importance of diversifying fuel supply sources to bolster the resilience of Pakistan’s energy supply chain. Procurement strategies are shifting to broaden sourcing from the international market, reducing reliance on any single corridor. This move aims to mitigate risks associated with geopolitical instability and ensure a more secure energy future for the country.

Broader Economic Context and Price Increases

The situation reflects a broader trend of rising global oil prices linked to the Middle East conflict. Finance Minister Aurangzeb had previously signaled the possibility of further price hikes, acknowledging the upward pressure on petroleum product prices. Although, the Finance Ministry later issued a statement clarifying that Aurangzeb did not specifically announce any additional increases during a briefing to the Senate Standing Committee on Finance and Revenue. He did, however, inform the committee about the rising trend in global crude oil prices.

The conflict’s impact extends beyond fuel prices. The Senate Standing Committee on Finance was likewise informed that a prolonged Middle East conflict – lasting weeks – could negatively affect inflation, domestic revenue, the current account balance, and remittance inflows. This highlights the interconnectedness of Pakistan’s economy with regional and global events.

Reserves and Diversification Efforts

Recent briefings to the Senate Standing Committee on Petroleum revealed more granular details regarding Pakistan’s fuel reserves. As of earlier this week, the country held sufficient petrol reserves for 27 days and diesel reserves for 21 days. Jet fuel (JP1) reserves were sufficient for 14 days, crude oil for 11 days, and liquefied natural gas (LNG) for nine days. These figures, while providing a snapshot of current availability, underscore the require for continuous monitoring and proactive supply management.

The government has also taken steps to allow the import of lower-quality fuel (below Euro 5 standard) to address supply concerns. Approximately 70% of Pakistan’s petrol imports originate in the Middle East, making the region’s stability critical to the country’s energy security. The disruption of ship movements has contributed to the recent price increases, with high-speed diesel prices rising from $88 to $187 per barrel and petrol increasing from $74 to $130 during the same period.

LNG Supply Disruptions and Power Sector Impact

The situation is particularly acute regarding LNG supplies. Qatar, a major supplier of LNG to Pakistan, has reportedly halted deliveries since March 2nd. Of the eight LNG cargoes scheduled for March, only two have arrived, with six more expected in April. This disruption has forced Sui Southern Gas Company to reduce gas supply to a fertilizer plant by 50% and to the power sector from 300 million cubic feet per day (MMCFD) to 130 MMCFD.

Officials warn that LNG may not be available in Pakistan after April 14th, potentially impacting the power sector’s ability to meet demand. Alternative sources, such as the State Oil Company of the Azerbaijan Republic (Socar), are being explored, but spot purchases from Socar are significantly more expensive ($24 per unit) compared to gas from Qatar ($9 per unit). This price differential could lead to higher electricity costs for consumers.

Government Response and Market Monitoring

Finance Minister Aurangzeb reiterated the government’s commitment to ensuring uninterrupted fuel availability across the country, emphasizing that the current stock position and supply outlook remain stable. He urged the public not to engage in panic buying or unnecessary stockpiling. The committee directed relevant authorities, in coordination with the Oil and Gas Regulatory Authority (OGRA) and provincial governments, to closely monitor stock levels and market activity to prevent hoarding and artificial shortages. Strict legal action will be taken against anyone attempting to disrupt the normal supply of fuel.

Next Steps: Continued Vigilance and Diversification

The government’s immediate focus remains on maintaining stable fuel supplies and mitigating the impact of rising global prices. The daily review meetings, led by the Finance Minister, will continue to assess the evolving situation in the Middle East and its implications for Pakistan’s energy sector. Longer-term, the emphasis on diversifying fuel supply sources is crucial for enhancing the country’s energy security and reducing its vulnerability to geopolitical shocks. The success of these diversification efforts will depend on securing favorable terms with alternative suppliers and investing in the necessary infrastructure to support increased imports from new sources.