Pakistan unveils measures to curb fuel use as prices surge amid Middle East war

Pakistan unveiled a series of measures on March 9 to reduce the use of transportation fuels as it steps up efforts to cope with supply disruptions and high prices resulting from the Middle East conflict.

Prime Minister Shehbaz Sharif said in a televised address that offices would operate four days a week -- except for banks -- while 50% of staff in both the public and private sectors would work from home, except for those in essential services.

In the education sector, the government has ordered all schools to close for two weeks, starting at the end of the current week, and to switch to online classes during that period, he added.

Under the measures, fuel allocated to government vehicles will be reduced by 50% for two months, while 60% of official vehicles will remain off the road during the same period.

As global oil prices surged, the government over the weekend raised retail prices of diesel and motor gasoline by 19.6% to Pakistan Rupees 335/liter ($1.17/liter) and 21% to Rupees 321/liter, respectively.

"Following the breakout of the Iran-US war, oil prices have crossed the $100/b territory, triggering weekly emergency price hikes in the country," said Hammad Ahmed, research analyst at Karachi-based broking unit Capital Management Ltd. "We expect March import volumes to fall, but they will recover in April due to the harvesting season and if the situation normalizes."

Rationing of fuel

Crude oil futures fell in midmorning trading in Asia on March 10 after US President Donald Trump announced sanctions relief for some countries, which could ease global oil supply.

At 11:22 am Singapore time (0322 GMT), the ICE May Brent crude futures contract was down $6.46/b (6.53%) day over day at $92.50/b, while the NYMEX April light sweet crude contract was down $6.32/b (6.67%) from the previous close at $88.45/b.

Crude prices surged at the start of the week to four-year highs amid strikes targeting Iranian and Gulf energy infrastructure.

Front-month NYMEX WTI rose to $119.48/b, while prompt ICE Brent rose to $119.50/b intraday, reaching levels last seen immediately after Russia's invasion of Ukraine in 2022.

Prices, however, retreated ahead of an emergency G7 finance ministers' meeting, which debated a coordinated release of strategic crude reserves but did not decide to release any.

Ahmed said that as Pakistan was bracing for a period of supply disruption, rationing fuel to customers would be the only option.

Sharif said that as the government diverts funds to import crude at high prices, it also plans measures to cut expenditure. Federal Cabinet members, advisers and special assistants will forgo salaries for two months, while members of parliament will see their salaries reduced by 25% during the same period.

The prime minister also announced a ban on foreign visits for federal and provincial ministers, advisers, special assistants and government officials, allowing only "extremely necessary" trips in the national interest. Governors will also face travel restrictions.

Speaking after a meeting involving the federal and provincial governments, Sharif said the country would adopt policies of "simplicity and savings" to curb public spending and ease economic pressure.

Retail fuel prices to rise further

Sharif said the "difficult economic and administrative decisions" had to be implemented, as Pakistan has little control over international oil prices. Further increases in fuel prices may be unavoidable in the coming days, but he pledged that the government would try to minimize the burden on citizens.

Pakistan-based brokerage Foundation Securities said in a report that demand for petroleum products is expected to falter, following a 20% rise in oil product prices over the weekend. Further increases are anticipated next weekend, it added.

Pakistan has started announcing petroleum product prices weekly, rather than the previous fortnightly schedule, to absorb price shocks and avoid passing on higher costs by keeping prices unchanged.

The country's oil consumption in the first eight months of fiscal year 2025-26 (July-June) rose 4% year over year to 10.96 million metric tons, according to data compiled by the Oil Companies Advisory Council, which tracks consumption, imports and exports. Motor gasoline consumption increased 4% to 5.13 million mt, while diesel sales rose 6% to 4.76 million mt over the same period.

The Ministry of Petroleum said in a statement March 4 that Pakistan has sought an alternative oil supply route through Saudi Arabia's Port of Yanbu on the Red Sea, as the closure of the Strait of Hormuz continues to disrupt fuel shipments.

Pak-Arab Refinery Co., with a refining capacity of 120,000 b/d, secured two crude oil cargoes to be shipped via alternative routes, allowing it to continue operations and extend its crude stock cover until March 25, an industry official with knowledge of the refinery's operations said March 4.

Pakistan's Cnergyico has secured crude oil supplies via alternative routes, importing about 4.8 million barrels, and will avoid routing cargoes through the Strait of Hormuz until at least May, a senior company official said March 5.