Pakistan refinery margins have turned negative for the first time in recent history, leaving the country’s refineries losing money on every barrel of petrol they produce, after international petrol prices fell below the price of crude oil.
Petrol refining margins dropped to negative $1 per barrel on a seven-day rolling average basis as of November 6, according to Topline Research. On November 5, the daily margin fell further to negative $5 per barrel. International petrol stood at $105.90 per barrel, below Dubai crude oil at $106.90 per barrel.
The figures, compiled from data by the Oil and Gas Regulatory Authority (OGRA) and Topline Research, show petrol and crude prices moving closely through much of October before both fell sharply towards the end of the month. By November 5, petrol had slipped below crude, pushing margins into negative territory.
Pakistan refinery margins: what a negative crack means
Refining margins, known in the industry as cracks, measure the gap between the price of refined fuel and the cost of the crude oil used to make it. When petrol sells for less than the crude needed to produce it, refiners lose money on petrol production.
A negative crack does not mean a refinery loses money on every product. Refineries also produce diesel, furnace oil, jet fuel and other products, and margins on those can differ. Yet petrol is a core product, so a negative petrol margin still cuts deep into earnings.
ProPakistani reported that the squeeze comes at a hard time for the sector. Domestic refineries already face pressure from a recently imposed levy of Rs49 per litre on petrol. The combination of negative international margins and the levy is expected to tighten refinery profitability further.
A price cut for drivers, a loss for refiners
The same price fall that hurts refiners has brought some relief to drivers. Petrol prices were cut by Rs6.59 per litre on November 6, with diesel down Rs4.25 per litre. The cut followed the drop in international prices, and it passed part of the benefit to consumers at the pump.
That trade-off sits at the heart of the story. Lower international prices help motorists and ease inflation, yet they leave refiners selling petrol below the cost of the crude they bought to make it. The government now faces a familiar tension between keeping fuel affordable and keeping the refining industry viable.
Pakistan wastes Rs3.5 trillion a year on energy imports it does not need, according to research from the LUMS Energy Institute, which shows how much the country spends on fuel from abroad. Domestic refining capacity matters because every litre refined at home reduces that import bill. If refineries cut runs or shut units because margins stay negative, imports would have to fill the gap.
What happens next
The key question is how long petrol stays below crude. A short dip would be a passing strain. A longer spell would force refineries to rethink production plans and could push the industry to seek relief from the government, either on the levy or on pricing.
Electricity tariffs have also moved this week, with Nepra notifying a Rs2.36 per unit fuel adjustment, while Pakistan’s trade deficit widened to $14.6 billion in July-October as imports rose faster than exports. Fuel costs run through both of those stories, and refinery margins are one more pressure point in the energy chain.
For now, the numbers are clear. Petrol at $105.90 against crude at $106.90 leaves refiners underwater on their main product, and the Rs49 levy adds to the strain. The industry will watch the next price readings closely to see whether the inversion lasts or fades.
Frequently asked questions
Why are Pakistan’s refinery margins negative?
International petrol prices have fallen below the price of Dubai crude oil. Petrol stood at $105.90 per barrel against crude at $106.90, leaving a negative margin of $1 per barrel on a seven-day average.
How negative did petrol margins fall?
Margins fell to negative $1 per barrel on a seven-day rolling average as of November 6, and the daily margin dropped to negative $5 per barrel on November 5.
What is a refining margin or crack?
It is the difference between the price of a refined product, such as petrol, and the cost of the crude oil used to produce it. A negative crack means the product sells for less than the crude it was made from.
What else is pressuring Pakistani refineries?
A recently imposed levy of Rs49 per litre on petrol is adding to the strain, on top of the negative international margins.
