Escalating energy disruptions from the US-Iran war have forced Pakistan to resurrect its dormant 2023 petroleum refining policy. The conflict, threatening the vital Strait of Hormuz shipping lane, has exposed the country’s intense vulnerability to external energy supply shocks, where a single maritime bottleneck triggers second-round inflationary spikes across food distribution and transport logistics.
Stalled for three years due to tax and tariff friction with the International Monetary Fund (IMF), the policy is now being fast-tracked ahead of the financial year 2026–27 budget. Islamabad has promised corrective fiscal measures to unlock 5.16 billion Euro installed greenfield and brownfield investments. This capital injection is crucial for upgrading outdated local refineries, which officials describe as critical national assets.
Currently, relying on expensive refined petroleum product imports rather than cheaper crude oil drains up to 1.72 billion Euro annually from Pakistan’s foreign exchange reserves. Local upgrades will not only enhance domestic fuel security but also curb the production of environmentally damaging by-products.