Syed Firasat Shah
The crisis around the Strait of Hormuz is a warning Pakistan cannot ignore. Even if hostilities ease, energy supplies, freight rates and insurance costs may not quickly return to normal. Renewed confrontation or intermittent attacks could disrupt shipments and raise prices without a complete closure.
For Pakistan, a fuel shock means pressure on foreign exchange, higher transport and electricity costs, inflation and more expensive farming. Food prices and household budgets would suffer. Pakistan cannot control events in the Gulf, but it can reduce vulnerability through advance planning, increased domestic production and protection of agricultural supplies.
Prepare for different levels of disruption
The government should plan for short crises, repeated interruptions, prolonged insecurity and partial normalisation with unreliable shipping. Regular assessments should cover usable stocks, import commitments, alternative suppliers and the ability to manage prolonged disruption.
1. Establish a fuel security plan
Pakistan needs a clear picture of usable crude oil, petrol, diesel, furnace oil, LPG and LNG stocks, and how long they would last under different scenarios. Announced storage capacity is not the same as fuel available for use; committed or inaccessible stocks must be counted separately.
The plan should set minimum stock levels, identify port and refinery bottlenecks, and establish transparent allocation rules prioritising agriculture, freight, public transport, essential electricity generation, hospitals and other critical services.
Pakistan should diversify suppliers, ports and routes where feasible, avoid dependence on one vulnerable corridor and seek flexible contracts. Alternatives must be suitable, timely and economical after freight and insurance. Conservation and efficiency can stretch stocks.
2. Reward additional domestic production
The government should encourage existing exploration and production (E&P) companies to bring forward sustainable additional oil and gas production through a time-limited Accelerated Sustainable Production Bonus. It should be paid only for independently verified output above an agreed baseline, linked to actual delivery and subject to technical and financial safeguards—not for production that would have occurred anyway.
For oil, the incentive should be compared with the cost of imports genuinely displaced, including landed crude costs and crisis-related freight and war-risk insurance. Gas should be assessed separately against imported LNG or other fuels that additional domestic gas can realistically replace.
For illustration, an additional 50,000 barrels of oil daily equals 18.25 million barrels annually. At an assumed import cost of $90 per barrel, potentially displaced imports would be worth about $1.64 billion a year; a $10-per-barrel incentive would cost about $183 million. These figures are illustrative, not a forecast or net-savings estimate. Actual results depend on capacity, reservoir conditions, production costs, crude quality, refinery compatibility and how much output genuinely replaces imports.
The focus should be work that can deliver additional output quickly: suitable workovers, restoring idle wells, removing surface-facility bottlenecks and accelerating planned interventions. Technical screening must prevent reservoir damage, unsafe practices and excessive depletion. Companies should submit field-by-field volumes, timelines, investment and unit costs for review by a joint technical team.
3. Examine leased vessels for supplementary storage
Leased vessels could temporarily store crude oil and suitable petroleum products, buffering delayed shipments, port congestion or sudden interruptions. Tanker use should be assessed against port access, transfer arrangements, safety, environmental requirements and insurance. Floating storage would supplement, not replace, onshore infrastructure.
Charter, insurance, loading and port costs—and delays in releasing fuel—could make this expensive. A pilot should proceed only if it compares favourably with expanding onshore stocks.
LNG needs separate consideration: it cannot be stored in ordinary oil tankers and requires specialised cryogenic carriers and compatible receiving and regasification facilities. A leased LNG vessel or floating storage and regasification unit may be worth considering, subject to terminal capacity, pipelines, charter costs and existing contract obligations. A rapid technical and commercial feasibility study should precede any announcement.
4. Protect agriculture and food supplies
Energy disruption can become a food-security crisis. Diesel powers tractors and tube wells and transports produce. Higher fuel and electricity costs raise farming expenses, while fertilisers, pesticides, seeds and other inputs may face import and price pressures.
Before the next planting cycle, the government should assess stocks and needs for urea, DAP, other fertilisers, pesticides, certified seeds, edible oils and critical food commodities, including import schedules and alternatives for delayed shipments.
Officials must distinguish physical shortages from price increases. Shortages may require early procurement or alternative sourcing; price shocks may call for targeted protection for farmers and vulnerable consumers.
Broad, uncosted subsidies could worsen fiscal and foreign-exchange pressures. Essential purchases should be diversified and brought forward where commercially justified, with energy, agriculture, commerce and finance ministries coordinating their plans.
Longer-term resilience requires reducing reliance on imported inputs where domestic production is viable. Priorities include reliable gas for efficient fertiliser production, quality seeds, soil testing, precision fertiliser use and less water and energy wastage. Gas allocation for fertiliser plants should reflect efficiency, domestic production costs, import parity and the opportunity cost of gas. Better efficiency can reduce imported inputs per unit of agricultural output.
Preparedness is cheaper than panic
Pakistan should immediately assess usable fuel and agricultural stocks, invite E&P proposals for sustainable additional production, evaluate floating storage and strengthen alternative sourcing. These steps cannot replace long-term energy reform, higher domestic production, efficient energy use, better storage and a resilient agricultural system, but they can limit damage from an external shock.
The lesson is simple: preparation often costs far less than being caught unprepared. Pakistan should act while supplies are still moving, not wait until shortages, price spikes and foreign-exchange pressure leave it with fewer choices.
