PSO flags record premium on oil imports amid Strait of Hormuz disruption

Islamabad: Pakistan State Oil (PSO) has informed the Oil and Gas Regulatory Authority (Ogra) that it is importing petroleum products at unprecedented premiums as supply routes remain under pressure during the US-Israel and Iran war, a development that could further raise domestic fuel prices.

As per details, the disruption of the Strait of Hormuz, a key passage for global oil shipments, has pushed up the cost of imports for Pakistan. PSO had previously been paying a premium of around $12 per barrel, but the rate later climbed to more than $34 per barrel, resulting in what was described as a record increase in local petroleum prices.

In a letter to the Ogra chairman, PSO highlighted the sharp rise in premiums and asked that the issue be considered in the pricing of petroleum products. The company also referred to the recently revised pricing formula introduced in view of the ongoing geopolitical conflict and heightened volatility in international crude markets.

"We would like to highlight that the premium on the recently arrived HSD (high-speed diesel) cargo for PSO, namely MT Kaliban, from the Suez STS area is $35.612 per barrel," PSO authorities said, adding that the premium on cargoes expected later in April could remain at roughly the same level.

The company warned that directly incorporating a premium of $35.6 per barrel into the next revision of HSD prices would sharply increase the price paid by consumers. That, based on Gasoil Arab Gulf Platts published till April 7, 2026, the existing ex-refinery price of Rs496.97 per litre was expected to increase by another Rs122.76 per litre if the elevated premium was fully built into the price.

"Considering the fact that HSD is mainly being imported by PSO at the moment, we recommend that these exceptionally high premiums may only be reimbursed to PSO and any other importing OMCs (oil marketing companies) rather than passing the same directly to the ex-refinery price," the company added.

PSO further stated that if HSD prices were linked to the pre-war premium of $5.10 per barrel, the estimated effect on the upcoming end-consumer price would be about Rs60 per litre. If the benchmark used was the last applied premium of $23.15 per barrel, the impact would be around Rs40 per litre. The company said this estimate was based on the assumption that the customs duty reimbursement mechanism would continue under existing practice.

According to PSO, such an arrangement would ensure that exceptional import margins were transferred to end-consumers only to the extent of the actual cost incurred. It also proposed that the difference between its actual import cost and the cost calculated on the basis of benchmark values should be reimbursed through the inland freight equalisation margin (IFEM) mechanism for all cargoes that had already received approval from the government of Pakistan.

The company said the same process should also apply to any other oil marketing company that imported HSD during the current week. "We hope that due consideration will be given to the above highlighted suggestions," PSO authorities said.

Pending claims and Ogra mechanism

Price differential claims (PDC) of oil marketing companies remain pending after the government decided to freeze fuel prices. Ogra has recently processed a payment of Rs38 billion in PDC, with the amount paid to 34 oil marketing companies.

Ogra has put in place the federal government’s decision by establishing a mechanism, approved by the government, to improve transparency, efficiency and timeliness in the verification and release of PDC. The framework is intended to provide a structured evaluation process and enable faster settlement of legitimate and eligible claims while maintaining financial discipline.