Pakistan’s oil industry is feeling the pinch of a plunging rupee that has made crude imports more costly and forced one refinery to book a hefty loss on a recent shipment, industry officials told The News on Friday.

One of the refineries, which imported 72,000 tons of crude oil in July, suffered a loss of Rs750 million due to the currency depreciation, an industry official said, requesting anonymity.

“The refinery had opened a letter of credit for the import at Rs287 per dollar in late July and had to settle it at 304 rupees per dollar on August 25,” the official added. The rupee has fallen more than 24.9 percent against the dollar since January 1, 2023, making imports more expensive and hurting the profitability of oil refiners and marketers.

“As the rupee depreciation has been continuing unabated, it has been making the oil sector worried, especially after one refinery had to pay Rs750 million more in a one-month period,” the official added. “All sectors are facing the same situation, but the said refinery is the latest example as it had to settle the LC on Friday.”

Industry officials said the exchange rate loss would be partially recovered when the government adjusts the prices of petroleum products on a fortnightly basis, based on the benchmark of how much state-owned Pakistan State Oil (PSO) incurs the loss on the exchange rate.

However, this means that consumers will have to pay more for fuel in the domestic market, where inflation is already high. “Consumers should be ready for a higher increase in the price of petroleum products in the coming fortnightly review of the prices because of the massive depreciation of the rupee since the caretaker setup was installed in the country,” another industry official said.

He said that global oil prices were stable and diesel had even seen a one-dollar contraction in the current fortnight compared to the previous one. “However, diesel price is expected to go up by Rs14 per liter so far, as there are a few days left when the final calculations will be made,” he added. “Same is the case with petrol as the sharp appreciation of the dollar against the local currency would make it dearer for the consumers in the next review.”

The official said the industry would definitely face tough times in terms of spending more on the import of crude oil due to the dollar appreciation, “but the consumers would be actually on the receiving end by paying more for diesel and petrol in the present time of high inflation”.

by Thenews