Bilawal Kamran
Pakistan has not fired a single shot in the war between the United States, Israel, and Iran. It has no military stake in the conflict, no seat at the table where the decisions are made, and no influence over when the shooting stops. What it does have is an economy that runs on imported energy, a population already stretched to the limit by three consecutive years of punishing inflation, and a government that must now make difficult decisions at speed in circumstances that leave very little room for error. The Iran war has come to Pakistan not through missiles but through the Strait of Hormuz, and that is proving to be quite enough.
The immediate picture is already serious. The war has engulfed the entire Gulf Cooperation Council region and the consequences for global energy supply have been swift and severe. The Strait of Hormuz, through which roughly twenty percent of the world’s daily oil consumption normally passes, has effectively shut down. Tanker companies are refusing to enter waters where Iranian strikes on vessels have already occurred. Shipping insurance has become prohibitively expensive. The result is that a large portion of the world’s petroleum supply is sitting on the wrong side of a chokepoint that nobody can currently guarantee to cross safely.
For most importing countries, this is a significant problem. For Pakistan, it is an acute one. The country holds approximately three to four weeks of petroleum reserves and around ten days of crude oil. That sounds like a reasonable buffer until you consider that shortages at the retail level do not wait for the national reserve to empty. Petrol pumps in the northern regions are already rationing supplies. Dealers, anticipating sharp price increases in the coming days, are buying aggressively and almost certainly hoarding. The incentive structure is working precisely against the national interest. Every day that official retail prices lag behind international reality is another day that private actors extract maximum advantage from the gap.
The price distortion is striking. Brent crude is trading in the low eighties per barrel. Yet diesel prices at the product level have surged to over a hundred and thirty dollars per barrel and petrol is approaching a hundred. The spread between crude and refined product prices reflects the panic in the refining and shipping markets: freight costs, war risk premiums, and insurance surcharges are all piling onto the base commodity price. This means that even if crude stabilises, the price of what actually reaches Pakistan’s pumps will remain elevated for as long as the supply chain disruption persists.
The government’s response to this must begin with price adjustment, and it must begin immediately. There is a strong instinct in Pakistani policymaking to delay fuel price increases, partly for political reasons and partly out of genuine concern for the burden on consumers. That instinct is understandable. It is also, in the current circumstances, counterproductive. Every day that prices remain below cost is a day that hoarding is rational, that shortages deepen, and that the fiscal damage to the state accumulates invisibly before arriving all at once. The government is reportedly considering weekly price revisions. That direction is correct. The first revision must come sooner rather than later, and it must be large enough to genuinely disincentivise hoarding. Half-measures at this stage simply delay and amplify the problem.
At the same time, the government must recognise that passing the full international price impact directly to consumers in a single move would be economically devastating and socially unsustainable. There is room here for intelligent policy rather than a blunt choice between subsidy and shock. Reducing the petroleum development levy, fixing import duties in rupee terms rather than as a percentage of a rapidly rising dollar price, and targeting relief specifically toward agricultural diesel rather than across the board: these are tools available to a government that chooses to use them. The goal is to eliminate the hoarding incentive while cushioning the blow on the most vulnerable segments of the economy.
But pricing alone will not be sufficient if the conflict persists. The broader energy sector faces its own gathering crisis. Qatar has already halted liquefied natural gas supplies. A significant portion of petroleum imports has been curtailed, and alternative routing around the Hormuz closure adds time, cost, and uncertainty to every cargo. The power sector is particularly exposed. Within weeks, Punjab is likely to face extended load-shedding driven by peak air-conditioning demand meeting the absence of imported gas. The government is moving to increase domestic gas and crude production to partially compensate, but domestic supply cannot fill a gap of this scale quickly. Imported coal faces the same supply chain disruptions as petroleum. The margins are thin everywhere.
This calls for demand management alongside supply measures. The working week may need to be reduced to four days. Eid holidays could be extended to reduce commercial energy consumption. Remote working should become mandatory for businesses and institutions where it is operationally feasible. These are not suggestions for normal times. They are the kinds of administrative interventions that governments deploy when supply cannot meet demand and the alternative is uncontrolled shortages. The political cost of imposing them is real. The cost of not imposing them and allowing a chaotic shortage to develop is far higher.
On the industrial side, the government should move to protect manufacturing and export capacity. Gas curtailments to industry have already begun. Furnace oil, which domestic refineries can produce, should have its levy reduced to make it a viable alternative fuel. Exports of furnace oil should be suspended and domestic supplies redirected to keep industries running. Refinery throughput should be maximised. Every barrel of domestically refined product is a barrel that does not need to cross the Strait of Hormuz.
The larger picture requires honest acknowledgment. If this war continues for weeks rather than days, Pakistan faces inflationary pressures of a kind that will dwarf anything the last three years have produced. Exchange rate pressure will intensify as import costs rise and remittance inflows from Gulf workers are disrupted. The government needs a crisis management framework that is activated now, not after the shortages appear on the front pages.
Pakistan did not choose this crisis. But it must manage it. The time available to get the response right is short, and it is already running.
