Pakistan has spent decades struggling with an energy crisis that has cost us industrial competitiveness, discouraged investment, weakened exports and placed an enormous burden on households. We have accumulated circular debt, struggled with gas shortages and repeatedly raised electricity and fuel prices to keep the system functioning. Yet after all these years, we remain dangerously exposed to developments thousands of kilometres beyond our borders.
The conflict in the Gulf has brought this vulnerability into sharp focus, raising an uncomfortable question: how can a country aspiring to achieve export-led growth and economic stability remain so dependent on energy supplies over which it has little control?
For Pakistan, a disruption in the Strait of Hormuz is not simply a problem for petroleum importers or the government officials responsible for arranging fuel supplies. Its consequences are felt in the textile mills, the fertiliser plants, the industrial estates and the agricultural fields that feed the country.
A rise in international oil and gas prices quickly finds its way into electricity tariffs, transportation costs, industrial production and food prices. Businesses already struggling with high taxes, expensive financing and uncertain policies find themselves facing yet another cost they cannot predict or control.
We have generally approached energy security as a matter of securing enough oil and gas, negotiating contracts and managing prices. But the Gulf conflict should make us reconsider whether this approach is adequate. Energy security has become a question of economic security, and unless we begin treating it as such, our ambitions for industrial growth, exports and greater economic independence will remain difficult to achieve.
According to the IEA, around 20 million barrels of oil and petroleum products passed through Hormuz daily in 2025, making up roughly a quarter of global seaborne oil trade. Nearly one-fifth of global LNG trade also passed through this route. These are enormous volumes concentrated in a relatively small geographical area, and the recent conflict has demonstrated how vulnerable international energy supplies remain.
Pakistan is particularly exposed because we have limited financial capacity to absorb prolonged disruptions. Our petroleum imports amounted to approximately USD 16.9 billion in FY2025–26. Any substantial increase in international prices creates additional demand for dollars, putting pressure on foreign exchange reserves, the exchange rate and ultimately inflation.
We have experienced this cycle repeatedly. The import bill increases, inflation rises, businesses face higher costs, and whatever fiscal space the government has disappears in managing another external shock. Yet remarkably little has changed in our approach.
Take our textile industry, which remains one of Pakistan’s principal sources of export earnings. A manufacturer in Faisalabad competes with producers in Bangladesh, Vietnam andIndia, where energy costs and reliability are important determinants of competitiveness. International buyers are not particularly interested in why a supplier cannot deliver an order. They want competitive prices and reliable deliveries.
When electricity tariffs rise or gas becomes unavailable, manufacturers must absorb the additional cost, renegotiate prices or risk losing business. For enterprises already operating on narrow margins, these are difficult choices.
We have spent years discussing textile exports in terms of incentives, concessional financing and government support packages. Some of these demands may be justified, but we should also ask how businesses can make long-term investments when one of their most important production inputs remains unpredictable.
Investment in modern machinery, technology and higher-value products requires confidence in future operating costs. Without that confidence, businesses delay expansion, continue with outdated equipment or look elsewhere for investment opportunities.
The loss to the country extends beyond higher electricity bills. It includes exports that never materialise, employment that is not created and markets gradually surrendered to competitors.
Agriculture presents an equally serious concern, although its dependence on energy receives much less attention.
Natural gas is essential for domestic fertiliser production, particularly urea. Diesel is required for tractors, irrigation pumps, harvesting machinery and transportation. When energy prices increase, farmers face higher costs at several stages of cultivation.
A small farmer cannot always recover these costs through higher crop prices. This can result in less use of fertiliser, delay cultivation or accept lower returns ultimately affecting yields and productivity.
Pakistan already faces serious challenges from water scarcity, inefficient irrigation and inadequate investment in farming technology. Uncertainty over energy and fertiliser availability adds another layer of difficulty.
The effect on the farmer is transferred through food inflation, making households suffer due to rising costs of meals. We should recognise that energy security, agricultural productivity and food security are closely connected and need to be addressed accordingly.
Perhaps the most worrying aspect of the Gulf crisis is our limited capacity to manage an extended disruption in imported energy supplies.
In April 2026, official figures indicated diesel stocks sufficient for approximately 25 days and crude oil for around 12 days. These are commercial inventories not national strategic reserve.
For a country so dependent on imported energy, this is a serious vulnerability.
Pakistan needs a credible programme to build strategic petroleum reserves, initially targeting at least 30 days of dedicated emergency stocks and gradually increasing this as finances and infrastructure permit. Such reserves need considerable investment, but the cost must be weighed against the damage caused by shortages, lost industrial production and disruption to essential services.
The private sector can participate in storage development and inventory financing under a transparent regulatory framework. Government need not own every facility, but it must ensure that emergency reserves are maintained and can be accessed when required.
Let’s not forget about diversification of energy. Our relationships with Gulf producers remain valuable, but excessive dependence on a limited number of suppliers and shipping routes exposes us to considerable risk. Alternative procurement arrangements, more flexible LNG contracts and improvements in refining and storage infrastructure deserve serious attention.
We should also accelerate investment in domestic energy resources, including hydropower, solar, wind. The rapid adoption of solar technology has already demonstrated how businesses and households respond when affordable alternatives become available. Better energy efficiency, reduced transmission losses and modern industrial equipment can also lower our import dependence.
There is an institutional question that deserves attention. If imported energy supplies were disrupted for several months, do we have a workable national plan identifying which sectors would receive priority? Have we assessed the consequences for fertiliser production, export industries, food transportation and electricity generation? Are financing arrangements available for emergency procurement?
These questions need answers before the next crisis hits us.
Pakistan should establish a permanent energy-security planning mechanism involving the relevant economic ministries, the State Bank, regulators and major productive sectors. Its responsibility should include assessing supply risks, maintain contingency plans and prepare for prolonged disruptions.
Energy security also deserves recognition within our broader national security framework. We have traditionally associated national security with territorial defence and military preparedness. These remain essential, but an economy unable to sustain industrial production, agricultural activity and essential services during an external shock is also vulnerable.
Pakistan cannot control geopolitical developments in the Gulf or determine international oil prices. It can, however, reduce its exposure through better planning, diversified supplies, strategic reserves and greater investment in domestic energy.
For too long, we have managed each energy crisis as an isolated emergency. Once supplies resume and prices settle, the urgency of reform disappears. We return to the same arrangements, carrying the same vulnerabilities into the next crisis.
Our ambitions for exports, industrial growth, agricultural productivity and employment depend on reasonably reliable and affordable energy. We should therefore judge energy policy by how effectively it supports these objectives and protects the economy when international conditions deteriorate.
The Gulf conflict has provided another warning. We would be making a costly mistake if we allowed this opportunity for serious reform to pass, as we have done so often in the past.
Copyright Business Recorder, 2026
The writer is a Harvard Alumni and tweets as @kashifmateenpk