 The First CargoNasir Iqbal and
Shahzada M. Naeem Nawaz
No 2026:70, PIDE Policy View Point from Pakistan Institute of Development Economics Abstract: Pakistan already has customs rules for foreign-owned bonded petroleum storage. What is missing is a bankable pilot transaction, with SIFC coordinating delivery within 120 days. At the onset of the 2026 Middle Eastern supply disruption, Pakistan lacked a dedicated strategic petroleum reserve. Almost 90 percent of Pakistan's crude oil and liquefied natural gas supplies entered through the Strait of Hormuz. As a result of the U.S.-Israel-Iran conflict, which led to significant restrictions on the strait, Pakistan had to rely on commercial stock and imported shipments. A government review (as reported in the media) on 30 March revealed approximately 23-24 days of diesel stocks and 11 days of crude oil stockpiles. It was noted that petrol availability was satisfactory (Government of Pakistan, Ministry of Finance, 2026a). The stocks mentioned serve the operational needs of the supply chain and are not emergency reserves. Oil marketing companies are required to maintain commercial stocks equivalent to at least 20 days of sales, but that requirement alone does not create a national drawdown mechanism (OGRA, 2016). International comparisons should be made here. International Energy Agency (IEA) member countries are required to maintain emergency stocks equivalent to 90 days of net imports. However, different combinations of government, agency, and industry stocks can be used to comply with this standard (IEA, n.d.). By March 2026, India had 74 days of total reserves and about 60 days of coverage, reflecting a mix of commercial stocks and its own strategic caverns (Government of India, Press Information Bureau, 2026). China does not provide a full series of stock data. However, the U.S. Energy Information Administration (EIA) estimated that nearly 1.4 billion barrels of strategic and directed commercial inventories were held at the end of 2025 (U.S. EIA, 2026). Pakistan is among the very few countries deficient in strategic or emergency reserves but has commercial stock. The development of a government-funded reserve is not feasible in the short term. In its May 2026 framework, the government proposed allocating PKR 10 per litre from the current petroleum tax, yielding approximately $700 million annually (Reuters, 2026c). Pakistan's Petroleum Minister independently estimated Pakistan's monthly crude requirement at approximately USD 550 million (Abbasi, 2026). On that basis, crude alone for 90 days would cost roughly USD 1.65 billion. The proposed fund would therefore need about 2.4 years to accumulate the purchase value, before accounting for storage, the required mix of crude and refined products, replenishment, financing and operating costs. Pakistan's USD 7 billion IMF programme further limits the scope for a large, debt-financed stock build-up in the near term (IMF, 2026). This does not mean that Pakistan must wait until it can finance every barrel itself. A practical alternative is to allow foreign suppliers to hold inventory in bonded storage on Pakistani soil, while giving Pakistan a clearly priced contractual option to purchase an agreed share during a declared supply emergency. Pages: 9 pages Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:pid:pviewp:2026:70 Access Statistics for this paper More papers in PIDE Policy View Point from Pakistan Institute of Development Economics Contact information at EDIRC. |
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