Oil price hike in the offing?


An exchange between Opposition Leader Ranil Wickremesinghe and Petroleum Minister Susil Premajayanth in Parliament on Thursday elicited the information that Sri Lanka’s will have to incur an added expenditure of around USD 2 billion on oil imports leading to speculation on fuel prices moving up.

The minister explained that delays in receiving crude oil for refining locally was the result of global disruption arising from restrictions imposed on the supply of Iranian oil. Outside long term agreements, it was difficult to buy crude oil on the spot market. Oil is purchased by CPC’s commercial division in accordance with established tender procedures on the basis of recommendations made by the relevant committees.

Mr. Wickremesinghe: Thank you, Hon. Minister. Could you tell this House how much more we will have to spend because of this? You will have an additional cost to buy oil.

Mr. Premajayanth: This is how it must be computed. A barrel of crude oil generally costs about $ 9 less than refined oil. But if we use Iranian light, we get the best yield at the refinery. But when we can’t get Iranian light, we have to buy Arabian or Omani light crude and that does not give us the yield of Iranian light.

Mr. Wickremesinghe: So you have to get more at a higher price. What will be the total cost?

Mr. Premajayanth: Not only us, even other countries have (the same problem)

Mr. Wickremesinghe: So at least another dollars one billion or two billion will be the cost?

Mr. Premajayanth: No. Actually last year we spent about dollars 3.6 billion on import of both crude oil and refine products. But this year it has gone up to dollars 5 billion.

Mr. Wickremesinghe: We are taking on an additional cost of two billion.

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