Oil industry refutes claims of excessive profits, cites pricing mechanism

ISLAMABAD: The oil industry has rejected recent assertions that it is making undue profits, clarifying that domestic fuel prices are determined by international benchmarks rather than the cost of previously acquired stocks.

According to industry representatives, local oil prices are set based on Platts averages, which reflect global market rates. This pricing mechanism, they explained, means that fluctuations in international prices directly impact domestic rates, regardless of the cost at which existing inventories were purchased.

Industry officials stated that this system sometimes results in losses for oil companies, particularly when global prices fall after stocks have been acquired at higher rates. They emphasized that the industry does not benefit from holding old stocks when prices rise, as the pricing formula does not allow for windfall profits based on inventory costs.

The clarification comes amid public debate and media reports suggesting that oil companies are profiting from the difference between the cost of old stocks and current retail prices. Industry representatives have stressed that such claims are inaccurate due to the established pricing mechanism tied to international averages.

They further noted that the sector operates under strict regulatory oversight, and all pricing calculations are transparent and in line with government policies. The industry has called for a better understanding of the pricing process to avoid misconceptions about profit margins and inventory management.

The statement from the oil industry aims to address concerns and provide clarity on how fuel prices are determined in Pakistan, highlighting the challenges faced due to volatile global markets.