The government has decided to further reduce the high-speed diesel (HSD) crack spread to $30 per barrel, a move that could bring down the price of diesel by around Rs18-20 per litre in one go. "Under the proposed mechanism, the HSD crack spread will be linked to the landed cost of crude oil for each individual refinery. The mechanism will remain in place until the crisis surrounding the Strait of Hormuz eases," a senior top official at the Petroleum Division told Probes Pakistan.

Earlier, on August 19, the government reduced the price of diesel by Rs32 per litre in one go by capping the HSD crack spread at $41.8 per barrel, compared with an international market crack of around $68-70 per barrel. In April, the government had also reduced the refinery crack to $41.5 per barrel, resulting in an estimated Rs24 billion loss in refinery profits. The government has now decided to reduce the capped HSD crack spread further, from $41.8 to $30 per barrel, which is expected to translate into a reduction of Rs18-20 per litre in the retail price of diesel.

However, the new mechanism is designed to ensure that the gross refinery margin (GRM) of individual refineries does not fall into negative territory and that their financial statements remain on a positive trajectory. This is considered important for refineries seeking financing from foreign lenders for approximately $5 billion in planned upgradation projects. The negative margin on furnace oil, however, remains a challenge and continues to affect the overall GRM of refineries.

The proposal was finalised during the seventh meeting of the Petroleum Price Committee held on September 2, 2026. It will now be presented to the prime minister for formal approval. If approved, it will subsequently be submitted to the Cabinet Committee on Energy (CCOE) for final ratification.