Business

Petrol users could be in for Avurudu shock

With the monthly fuel price revision scheduled for Wednesday (10 April), global oil prices have gone up significantly since the last revision on 13 March, opening up the possibility of another fuel price hike ahead of the Sinhala and Tamil New Year.

Since the last revision, the Singapore Platts price of a barrel of petrol, according to which Sri Lanka imports fuel, had gone up by 9.1% from $ 69.65 to $ 76 by Thursday (04), while the price of a barrel of diesel has gone up by 1.3% from $ 78.94 to $ 79.98.

Brent oil prices rose on Thursday, touching $ 70 per barrel for the first time in nearly five months, as expectations of tight global supply outweighed rising US production and less robust global demand indicators. The hike is also partly due to an agreement between the Organisation of the Petroleum Exporting Countries (OPEC) and allies such as Russia, a group known as OPEC+, to reduce oil output by about 1.2 million barrels per day this year to prevent a supply overhang from growing.

However, the Government does not base its monthly revisions on the Singapore Platts price of the day prior to the revision, but the average of oil prices from the previous fuel price revision to the day prior to the upcoming revision.

Based on the fuel price formula, which was brought in to reflect the fluctuations of global oil prices, this would be the fourth price revision for 2019 in Sri Lanka.

Despite a significant increase in global oil prices in January, Sri Lanka reduced the price of a litre of 92 octane petrol by 1.6%, 95 octane by 1.3%, auto diesel by 2%, and super diesel by 2.5%.

Following further increases in global oil prices, during the last revision, the price of petrol octane 92 has been increased by Rs. 6 per litre and petrol octane 95 by Rs. 5 per litre. The price of diesel has been increased by Rs. 4 per litre and super diesel by Rs. 8 per litre.

In its third revision last month, the Ministry of Finance increased the prices further by announcing a litre of petrol 95 octane for Rs. 159, petrol 92 octane for Rs.132, super diesel for Rs. 134, and auto diesel for Rs. 104. However, the third revision was delayed by three days from its planned date of the 10th due to the tabling of the Budget 2019.

The fuel price formula is adjusted based on Platts Singapore benchmark prices which is the daily average of all trading transactions between buyers and sellers of petroleum products as assessed and summarised by the Standard and Poor’s Platts, a Singapore-based market wire service.