Islamabad, March 8,2023: Pakistans oil industry is reportedly in serious trouble in arranging crude oil and petroleum products owing to foreign exchange constraints and prevailing product pricing, particularly following the recent currency depreciation and increase in the central banks policy rate, media reports said.

Reporting these challenges to the government, the Oil Companies Advisory Council (OCAC)an association of more than three-dozen major oil marketing companies (OMCs) and refinerieshas warned of a major disruption to the already fragile supply chain, Dawn reported.

In a communication to the ministers for finance and energy, the Governor of the State Bank of Pakistan (SBP) and the Chairman of the Oil and Gas Regulatory Authority (Ogra), the association has sought an urgent engagement to address the “severe impact of the recent depreciation of the rupee”.

The OCAC recalled that the oil industry had been requesting the ministries of energy and finance for developing a transparent mechanism for the complete recovery of foreign exchange losses in product pricing. It said the government should immediately revise the prices based on the current exchange rate but if it was not possible in the given challenging situation then at least a system should be put in place immediately.

The recent steep depreciation (of about Rs 20 against the US dollar) had made the existing letter of credit (LC) lines inadequate for the industry, resultantly “there is a grave danger that import of crude and refined products may be disrupted”, the industry warned and highlighted that it is also a point of great concern for the industry that the cost of opening confirmed LCs has gone up many times, adversely impacting the profitability as this cost is not absorbed in the pricing, Dawn reported.