ISLAMABAD: The federal cabinet has capped the high-speed diesel (HSD) crack spread at $38 per barrel and extended the crude-based pricing mechanism for another three months amid the Iran-US conflict, while retaining the option of an early review if geopolitical tensions ease and international oil prices decline sharply.
The Directorate General of Oil (DG Oil), Petroleum Division, informed the Oil and Gas Regulatory Authority (OGRA) in a letter dated October 19, 2026, that the cabinet had approved the revised mechanism and requested its immediate implementation.
Under the revised arrangement, the HSD crack spread has a ceiling of $38 per barrel and a floor of $11.33 per barrel. The seven-working-day average of the HSD crack will be used in determining the applicable crack under the revised formula, subject to the prescribed ceiling.
The decision revises the mechanism previously approved by the federal cabinet on August 19, 2026, and extends the crude-based pricing arrangement for another three months. The government has retained the flexibility to reconsider the mechanism before the end of this period if the geopolitical situation improves and international prices register a rapid decline.
The revised framework comes amid uncertainty in international oil markets associated with the Iran-US conflict. However, the Petroleum Division’s letter does not identify any specific military attack as the direct cause of the cabinet’s decision.
The crack spread represents the price difference between crude oil and refined petroleum products, including diesel. It is an input in petroleum pricing calculations and should not be confused with the profit margin of oil marketing companies or the retail price charged to consumers.
For consumers, the distinction is important. The $38-per-barrel ceiling applies to the HSD crack spread used in the pricing formula; it does not cap the retail price of diesel at a corresponding level or guarantee a reduction at petrol pumps.
The Petroleum Division has stated that all other parameters governing petroleum product prices will continue under existing practice. Consequently, the final impact on diesel prices will depend on the applicable pricing inputs and the operation of the overall mechanism.
Diesel prices have wider economic implications because HSD is extensively used in goods transportation, agricultural machinery and other commercial activities. Changes in diesel prices can affect freight charges, farm operating expenses and the cost of moving essential commodities across the country.
The three-month extension provides continuity in the revised pricing arrangement while the government monitors geopolitical developments and international oil prices. An earlier review remains possible if conditions improve and international prices fall sharply.
The Directorate General of Oil has asked OGRA to take the necessary steps for immediate implementation of the cabinet’s decision and inform all concerned stakeholders.