The oil price on your screen is not the price Pakistan pays

The setup: a war the headlines say is over

The episode opens with Muzamil framing a paradox. Pakistan has just played a visible role brokering peace talks — the so-called Islamabad Records — and the country’s international standing has lifted with it. That, he says, is worth celebrating. But the celebration risks obscuring what the underlying conflict has done to the plumbing of the global economy. The information minister has confirmed there has been no follow-up from the Iranian side on further peace negotiations. The ceasefire has been extended by Trump, but the Strait of Hormuz is, by and large, still closed.

To unpack what that actually means, Muzamil brings in Osama, an energy markets analyst at Oil and Energy Consulting and a regular face on BBC, CNN, Sky News, Al Jazeera, and TRT World. The brief is to get into the granular mechanics — how these supply chains work, and what their disruption is really doing to prices, inflation, and Pakistan’s near future.

The Strait of Hormuz, in numbers

Osama starts with the data. Traffic through the Strait did not collapse to zero. It fluctuated. Before the war, crude and condensate loadings ran at roughly nineteen to twenty million barrels a day. During the war, that fell to around 3.5 to 3.8 million barrels a day. “It’s a huge huge huge fall in terms of the very loadings,” he says.

He stacks that on top of the production losses from direct strikes. More than fifty energy sites have been hit. Between the Strait disruption and those strikes, the world is now running a deficit somewhere in the range of twenty to thirty million barrels a day. The cumulative shortfall has already crossed five hundred million barrels. “Almost — you know — only five hundred million barrels less from a billion barrel,” he notes. If the disruption continues, analysts expect an annual supply cut of one to two million barrels per day baked in.

The crucial point, and one Osama is careful to underline, is that reopening the Strait does not undo this. Production lost is production lost. “Even if the war ends, we will be stepping into a tighter energy slash oil market in the at least for the near future.”

Paper price versus physical price

Muzamil pushes on the question every viewer is silently asking: if all this is true, why is the screen still showing oil somewhere between eighty-three and eighty-nine dollars a barrel? Why did prices dip sharply when the ceasefire was announced?

Osama’s answer is the spine of the episode. The price on oilprice.com, on trading economics, on any benchmark screen — WTI or Brent — is the futures price in the paper market. It is a contract for delivery later, traded by algorithms and traders, with no intention of physical delivery attached. The eighteen-to-twenty-percent overnight fall on ceasefire news happened in this paper market.

The physical market is a different animal. When Pakistan actually books a tanker, the price it quotes against is the dated Brent spot price. “Dated Brent’s price, if you look at it, it went to a hundred and forty-five to a hundred and fifty dollars. Last week it came down to about a hundred and thirty-two.” Products are worse: middle distillates, jet fuel, the industrial inputs that come off refining — these have touched two hundred and sixty dollars.

The pre-war gap between paper and physical was two to five dollars a barrel. It is now thirty to forty. “It is a traders’ world. It is an algorithm world,” Osama says of the paper screen. “What will affect your life and my life and the fiscal condition of the government of Pakistan — that is going to be decided by the physical market. And the physical market right now is still close to its recent highs.”

What Pakistan is actually paying

Muzamil presses for the Pakistan-specific number. Eighty to ninety percent of Pakistan’s crude comes from the Middle East basket, not Brent and not WTI. At one point during the conflict that basket touched a hundred and seventy. The conversation lands on a concrete figure: Pakistan is paying roughly a thirty to thirty-five dollar premium over the headline benchmark, and total landed cost sits between one hundred and thirty and one hundred and fifty dollars a barrel.

The budget was built on seventy to eighty dollars. The ex-refinery import price is therefore roughly one hundred percent higher than the planning assumption. That, Osama is clear, is the actual base under the recent twenty-one-percent overnight petrol price hike. The petroleum levy sits on top of an import cost that has already doubled.

The six-to-eight-month tail

Muzamil offers the best-case hypothetical: tonight, the call comes through, the Strait is fully open, supply resumes. Does the market snap back to February?

Osama walks through why it does not. First, the supply that was simply rerouted comes back quickly — that part is real. Second, the production lost from force majeure events does not. He gives a specific example: the Ras Laffan complex in Qatar, where the Shell Pearl gas-to-liquids project was hit. GTL produces highly specific liquids that go into particular car companies, airlines, and industries. That production is concentrated in the Gulf because the oil, the pipelines, and the logistics are all there. Replacement is not weeks; it is many months.

Against that, he weighs the offsetting supply. OPEC has three to four million barrels per day of spare capacity. Non-OPEC producers — Guyana, Argentina, Mexico, US frackers now moving into the Gulf — are scaling up. Russia and Iran are sitting on roughly a hundred and fifty to one hundred and sixty million barrels each in floating inventory, partly because of the fear the Strait would shut entirely. Forty-five percent of global oil is moving via the so-called dark fleet of untracked tankers.

His honest estimate: six to eight months of disrupted supply, then a settling down. But the macroeconomic effect runs longer. “If an interest rate increases, its impact shows up a year and a half later. If supply falls one percent, prices rise four dollars, and that has to flow through inflation. In Pakistan’s CPI basket, oil has a certain weightage. Our inflation will go to thirteen, fourteen percent if this runs through June.” Short-term disruption in oil. Medium-to-long-term issues in the real economy.

Urea, food, and the second-order shock

Muzamil pivots to urea — a subject he says viewers underweight because they live with petrol prices daily but rarely think about fertiliser. Pre-war, urea was at three hundred and seventy-seven dollars. It is now at six hundred and ninety-one — an eighty-three percent jump against oil’s roughly twelve to thirteen percent move from pre-war levels. The urea move, he argues, is what real shortage looks like when the paper-market manipulation is not there to cushion the optics.

Osama concedes he is not a food-price expert but makes the structural point. Gas is a major feedstock for fertiliser plants, and gas prices spiked harder and faster than oil during the conflict. Pakistan is self-sufficient in urea, which is a genuine cushion, but the second-order channels are real: diesel cost on trucks moving inputs and outputs, broader inflation feeding through to food, and a domestic agricultural base that is already eroding. Area under cultivation has fallen. Average farm size has dropped fifteen to twenty-five percent over recent years. Per-acre yields have fallen even year on year.

He then names the underlying fragility. According to a State Bank report, thirty-eight to forty percent of Pakistani households are food-insecure at baseline. Sixty to seventy percent face acute food insecurity at some point in a given year. He cites research showing a direct correlation between food prices and rising social unrest, pointing the audience to the UN FAO food price index. “All in all, holistically, we will have to face an inflationary trend. There’s no other way of saying this.”

The long-duration view

Muzamil closes with the geopolitical frame. If the talks collapse and the conflict resumes, what is Osama’s read?

Osama answers with a borrowed framework: Fernand Braudel’s longue durée. Day-to-day events on the surface of the sea — flood, waves, dying fish — are not where the real change is. The real change is on the seabed. International relations, he argues, should be read the same way. Wars, peace talks, ceasefires are surface. The trend on the seabed is what matters.

He sees two trends. Short-term, peace talks may yield something — Trump has worked on it, Iran needs to move toward resolution. Long-term, his personal reading is that the global system needs a scapegoat with geographic dominance, and Iran will come out a strong player. The implication: this cycle will repeat.

If that is the trajectory, energy markets carry a permanently embedded geopolitical risk premium. The “Tehran tollbooth” — two million dollars per ship in transit tax, denominated in yuan — becomes a feature, not a glitch. Pakistan’s fiscal deficit gets worse. Inflation stays higher. The cost-of-living crisis, already heavy, gets heavier. The balance-of-payments problem, already unresolved, may stop having a resolution path at all.

His final point is the one Muzamil reinforces hardest. “Good diplomacy and good foreign policy abroad — wonderful. But does this automatically translate into a good economic scorecard at home? No. So this automatic translation will not happen. It has to be done. Assuring the upside is one thing. Managing the downside is a different thing.”

Pakistan has done the first. The second is the open question.

Where the wedge actually is

Muzamil ends with the strategic implication. If oil prices stay structurally elevated, an import-dependent country like Pakistan cannot policy its way out of the swamp on the demand side alone. The exit is electrification. He notes Pakistan has already deployed roughly nineteen gigawatts of solar at the household level — a quietly democratised rollout — and that the next constraint is storage. Lithium-ion is expensive. Sodium-ion is emerging as a cheaper alternative with lower energy density but a longer lifespan, well-suited to home and industrial use cases.

He leaves the audience with homework: read on sodium-ion adoption curves. He also sketches the chessboard above it. China is reportedly considering export controls on solar panel manufacturing equipment to the US. The same logic that uses oil to slow China’s growth is being mirrored back through renewables. The world is not just shifting energy sources. It is reshuffling who controls them.

That is the closing note. The oil shock is real, the relief on the screen is partly an illusion, and the long answer is not cheaper petrol. The long answer is owning the next energy stack before the next geopolitical risk premium is priced in.