After an underlying credit bubble collapsed, world oil prices kept tumbling but Sri Lankan customers are yet to feel the benefit of reduced prices.

Chairman of Ceylon Petroleum Corporation, Asantha de Mel is on record saying "Prices cannot be cut immediately because of large losses incurred in the third quarter of 2008."

However the first six months operations of the CPC resulted in a profit of Rs 1.7 billion, with the bottom line boosted with hedging gains.

In the past, the main opposition party had successfully operated a pricing formula which De Mel says is not workable since the CPC has stocked up fuel at high prices and is unable to bring down prices immediately.

With prices of crude oil nearing the US $ 100 mark, CPC is unable to give the benefit of reduced prices as the stock in hand is reported at US $ 134 per barrel, De Mel added.

There is growing unhappiness at the way petrol users are being fleeced and such profits are used to subsidize the Diesel guzzling SUV’s owned by commercial enterprises and super rich sections of society, including politicians, the LBO report added.

Sri Lanka’s fuel pricing is politicized and there is no published information for the people to know how much tax the government is earning or how much profits the organisation is making.

In comparison, cooking gas has been put under formula under a court order. No one however has taken CPC to court for fleecing petrol users, who are mainly motorcycle and small car users.

What is needed today is market pricing, rather than politicised pricing, successfully implemented by countries with well managed budgets and single digil inflation.

Sri Lanka’s users of petrol pay Rs. 157 a litre while the price of refined petrol internationally is in the region of Rs. 70.70 with an exchange rate of Rs. 108 per dollar, according to prices released by the Central Bank.

In developing countries, where politicians and policy makers have a weak understanding of economics believe that inflation is a petroleum phenomenon rather than a monetary one, emerging from the Central Bank.

Some Central Bankers have claimed at times that oil imports (and not other imports) caused foreign exchange shortages, though currency crises are a problem associated with a soft-pegged exchange rate which has little to do with imports of whatever variety including oil.