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Pakistan may cut fuel prices despite refiners’ concerns
PAKISTAN
PAKISTAN’S Oil and Gas Regulatory Authority (OGRA) has reportedly called for retail gasoline prices to be reduced despite warnings of a loom- ing fuel shortage.
OGRA has recommended a PKR5-10 ($0.031-0.062) cut in gasoline prices to the Energy Ministry, Bol News reported on May 28.
Once the ministry has approved the recom- mendation it will then go before the Finance Ministry. Bol News said the current price for gasoline was PKR81.58 ($0.505) per litre.
Pakistan Today, meanwhile, reported that OGRA was recommending a PKR2 ($0.012) cut to the current price of price. High speed diesel is currently selling for PKR80.1 ($0.496) per litre, while light diesel is fetching PKR47.51 ($0.294) per litre.
The recommendation is something of a sur- prise, given recent reports that low fuel prices could force the country’s refineries to cut pro- duction and thus potentially open to the door to supply shortages.
The Express Tribune reported on May 21 that refiners had warned the government they were facing PKR31bn ($192mn) worth of inven- tory losses in March and April and that cheaper imports by state-owned Pakistan State Oil (PSO) could force them to cut fuel production. Such a move, they said, would have “serious implica- tions” that include a supply shortfall.
Downstream operators are understood to
have highlighted the fact that PSO’s cheaper oil imports in the first half of May would inform June’s ex-refinery price. They argued that Islam- abad should either keep May’s ex-refinery price in place for June or move to a fortnightly pricing mechanism.
The Express Tribune calculated that the June ex-refinery price for gasoline and high-speed diesel in June would be PKR19 ($0.118) per litre and PKR28 ($0.173) per litre respectively based on PSO’s tariff in the first half of the month.
The refiners warned that negative margins on imported crude meant they were unlikely to do more than to operate at the minimum throughput.
While PSO might be willing to rack up losses on imported oil and fuel, the private sector has warned that increasing PSO’s imports to meet demand would take time and could lead to a serious supply gap.
“In our considered view, an urgent relief package is required from the government for an interim period to ensure sustainability of refin- ery operations failing, while it may cause some irreversible damage or financial collapse of refineries resulting in massive unemployment in refining and allied industry in addition to [com- promising the] energy security of the country,” The Express Tribune quoted the refineries as saying.
Week 22 03•June•2020 w w w . N E W S B A S E . c o m P9
