Acute Petrol Shortage to Hit Pakistan

On Thursday, refineries issued a warning that if the government does not address the letters of credit (LCs) problems for the import of raw materials and additives required by the local refining industry, a petrol crisis could occur in the nation by mid-February.

A national newspaper reported that the refining industry, in a series of letters, expressed that the combination of the delay in payment for raw materials and additives and the shortage of dollars had seriously impacted petrol production.

In separate letters to the Minister of State for Petroleum, Musadik Malik, and the Governor of the State Bank of Pakistan, Jameel Ahmed, the local refining sector warned that if immediate action is not taken, the situation will become extremely critical by mid-February 2023.

The difficulties in obtaining letters of credit to pay for raw materials and other inputs have been identified as major contributors to the impending crisis. As vendors started to hoard supplies in anticipation of a price increase during the next two-week review, petrol shortages have already started to occur in Punjab.

PETROL PRICE IN PAKISTAN, 2023

Let’s examine the most recent fuel prices in Pakistan. The information below displays the present prices of the commonly accessible petroleum derivatives in the country, including petrol, diesel, light diesel, and kerosene oil.

Fuel	Fuel Price (28 Jan 2023)	Increased	Fuel Price (29 Jan 2023)
Petrol	PKR 214.8	PKR 35	PKR 249.8 (New Price)
Diesel	PKR 227.8	PKR 35	PKR 262.8 (New Price)
Light Diesel	PKR 169	PKR 18	PKR 187 (New Price)
Kerosene Oil	PKR 171.83	PKR 18	PKR 189.83 (New Price)

State Bank of Pakistan

It is worth noting that the State Bank of Pakistan has placed petroleum products on its priority list of essential imports for critical industries’ foreign remittances. However, imports of essential raw materials and additives, for which letters of credit have already been established, are being held by banks. Banks remain cautious about establishing letters of credit for imports of these materials, which are due to be paid in February/March 2023.

The refineries warned that any delay or interruption in foreign payments for these imports would severely disrupt their operations, particularly the local production of petrol. The refining sector emphasized that increasing the production of domestic petroleum products, such as petrol, is of the utmost importance, as oil marketing companies are already encountering difficulties in importing fuel due to the forex liquidity crisis in Pakistan.

Additionally, the refining sector pointed out that it has made substantial contributions to Pakistan’s economic development through the revenue, government levies, and taxes generated, as well as the processing of crude oil and the significant savings in foreign exchange achieved through import substitution.