Pakistan is considering cutting the cap on high speed diesel refining margins to $30 per barrel from the current ceiling of $41.89, as the government seeks to limit the impact of unusually high international diesel margins on domestic consumers.
The existing cap was introduced last month after international diesel crack spreads surged amid geopolitical tensions and supply disruptions. Sources said the government considers $30 per barrel a reasonable margin for domestic refineries.
Refiners, however, have opposed the proposed reduction, saying the current period of strong margins provides an important opportunity to build equity for major modernization projects.
Pakistan’s five refineries are preparing investments of about $5 billion to $6 billion under the Brownfield Refining Policy to increase petrol and diesel production, expand capacity and reduce furnace oil output.
Refinery officials said lower margins would reduce profits and weaken their ability to finance the equity portion of these projects. They argued that strong earnings during periods of favorable international cracks should be used to strengthen refinery balance sheets because refining margins can fall sharply when global market conditions normalize.
Pakistan’s gross refining margins averaged $28.8 per barrel in August, down from $36.7 in July but sharply higher than $5.4 in August 2025. The decline from July was partly linked to the government’s HSD margin cap, which took effect on Aug. 20.
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