ISLAMABAD: The Oil Companies Advisory Council (OCAC) has raised serious concerns over reported government plans to review inventory gains and introduce a cross-subsidy mechanism in the petroleum sector, cautioning that such measures could undermine energy security and disrupt market stability.
In a letter addressed to the Federal Secretary, Ministry of Energy (Petroleum Division), OCAC said recent media reports about the constitution of a high-level committee to examine recovery of inventory gains have created uncertainty within the industry, despite the absence of any formal communication.
The council emphasised that any policy intervention must be guided by principles of fairness, regulatory consistency, and long-term energy security, while factoring in the operational realities of Pakistan’s oil sector.
Highlighting recent global developments, OCAC noted that the March–April 2026 period witnessed exceptional geopolitical volatility, which significantly impacted international oil markets. It argued that inventory gains arising during such periods are temporary and often reversed when prices correct, making them part of a broader “inventory risk cycle” rather than standalone windfall profits.
“The industry remains equally exposed to inventory losses when prices decline,” the letter stated, warning that recovering gains without compensating losses would create an imbalance detrimental to the sector.
The council underscored that Oil Marketing Companies (OMCs) are legally required to maintain a mandatory 20-day stock cover to ensure uninterrupted fuel supply. These inventories, it said, are not speculative holdings but a statutory obligation aimed at safeguarding national energy security.
Pakistan’s heavy reliance on imports—around 80 percent of crude oil, 70 percent of motor gasoline, and 30 percent of high-speed diesel—further exposes the sector to global price volatility, making inventory fluctuations an inherent feature of the business. OCAC also pointed to emerging international market trends, noting that forecasts for July–September 2026 suggest weakening global demand and easing geopolitical pressures, which could lead to price corrections and offset recent gains.
The industry body warned that setting a precedent of recovering inventory gains during upward price cycles, while leaving losses to be borne solely by companies, could discourage adequate stockholding and weaken supply resilience during crises.
In addition, OCAC highlighted mounting financial pressures on the sector, including outstanding Price Differential Claims (PDC) of approximately Rs66.7 billion, stagnant margins, rising operational costs, and increasing compliance requirements.
Copyright Business Recorder, 2026
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