The ambiguity in the new pricing formula for refinery feedstock, especially regarding the 95 percent coefficient, has raised many concerns in the oil and gas industry. The new cabinet resolution was approved on September 27, 2026, and has replaced the previous directive from the Ministry of Oil since the beginning of September. According to this resolution, the discount on light crude oil has been reduced from five dollars to two dollars, and the discount on heavy crude oil has decreased from six dollars to about 4.1 dollars per barrel.
Financial and Economic Impacts
This reduction in discounts means an increase in the feedstock costs for refineries and a decrease in their operating profit margins. Assuming other components of the formula remain constant, the calculated price for each barrel of light crude oil increases by three dollars, and the price for heavy crude oil rises by about 1.9 dollars. These changes will vary based on the type of feedstock received, the product mix, and the operational structure of each company.
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Mohammad Zarieh Zahraei, a capital market analyst, believes that changes in the pricing formula, especially in the discount section, can have profound effects on the profits and losses of refining companies. He points out that deducting a few dollars from the average price of benchmark oils is not just a commercial discount; part of it relates to the quality difference of the delivered crude oil.
Pricing Mechanism in Emergency Conditions
One of the important clauses of this resolution refers to emergency conditions and the special pricing mechanism in such situations. The Ministry of Oil has been authorized to calculate the feedstock price based on the last announced prices before March 1, 2026, during emergencies. This change could significantly impact the profitability of refineries and reduce the predictability of companies' revenue streams.
While this resolution is not limited to changing two figures related to crude oil discounts, how the 95 percent coefficient will be applied in the new formula remains unclear. Analysts believe that this ambiguity could have significant financial effects on the oil refining industry, and further clarifications in this regard are necessary.
Overall, while the reduction in feedstock discounts directly affects the profit margins of refineries, the more sensitive aspect of this resolution relates to the pricing mechanism in emergency conditions, which could have greater impacts on the profitability of this industry.
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