The increase in tax has come after wide criticism from political parties that the Government is allowing Lanka IOC to completely take away the profits enjoyed due to the massive drop in global oil prices.
Janatha Vimukthi Permuna (JVP) Leader Anura Kumara Dissanayake was vocal on this matter as during a recent television interview he stated that Lanka IOC is incurring an approximate additional profit of Rs. 30 per litre of fuel sold.
“Even after deducting the import cost of petroleum, port charges, vehicle transport costs, and retailers’ profit, Lanka IOC still has Rs. 30 as additional profit per litre. So does the CPC – but let’s leave it alone; it is state-owned.
“What should the Government do now for the IOC? Either they should reduce the prices and pass the benefits onto the consumers or a tax of Rs. 30 should be imposed on them,” Dissanayake stated.
Furthermore, he alleged that Lanka IOC sells an approximate volume of two million litres per day, thereby making an additional profit of Rs. 60 million daily and Rs. 1,800 million monthly.
“It has been a month now since they started enjoying this additional profit. How do they take this profit to India? As dollars. We cannot protect our additional dollars. IOC is taking this. Until the IOC made such a whopping profit, were regulators unaware of it? I believe that this is being shared amongst the politicians,” he alleged.
Global oil prices have been on a declining trend amidst the coronavirus (Covid-19) pandemic and it has spread in over 195 countries. The Singapore Platts price of a barrel of petrol and a barrel of diesel started to decline since January, and have reached below $ 20 for the first time in decades; otherwise is at $ 60, mostly.
However, Sri Lankan President Gotabaya Rajapaksa has taken the stance that fuel prices would not be reduced as the benefit would be passed on to the consumers through other concessions such as reduced prices of canned fish and dhal.
Global oil prices were seen increasing considerably due to the escalated tensions between the US and Iran late last year and early this year, mainly due to the killing of Iranian Military Commander Maj. Gen. Qasem Soleimani.
However, this trend saw a reversal following the coronavirus outbreak that came into the global limelight in January this year. Driven by a comparatively lower demand for oil, owing to restricted movement, the lockdown of cities, and cancellation of air and ground travel to contain the spread of the virus, global oil prices witnessed a double-digit drop from their early-January levels. Furthermore, Iran, one of the biggest oil producers in the world, is also suffering to contain the coronavirus locally.
The Singapore Platts price of a barrel of petrol was $ 63.70 on 12 February, which was a drop of over 20% from prices on 6 January. The price of a litre of diesel was decreased by over 20% as it dropped to $ 65.13 per barrel from $ 81.44 per barrel on 6 January. Brent futures collapsed over 65% in the first quarter, while WTI oil prices slumped more than 66% over the same period.
Last Tuesday (31), US President Donald Trump stated that he spoke to both Russian President Vladimir Putin and Saudi Arabian Crown Prince Mohammed Bin Salman and made a conciliatory gesture, but Saudi Arabia was not co-operative.
Saudi Arabia, for its part, needs oil at a whopping $ 85 per barrel to balance its national fiscal accounts, according to the International Monetary fund (IMF), while Russia needs prices in at least the mid-$ 40s.
Aljazeera reported that Saudi Arabia began the month supplying more than 12 million barrels per day and Aramco was loading a record 15 tankers with 18.8 million barrels of oil on a single day earlier this week.
Amidst growing concerns surrounding the coronavirus outbreak in China, the world’s biggest oil importer, the Organisation of the Petroleum Exporting Countries (OPEC) lowered its 2020 demand forecast for its crude oil by 200,000 barrels per day (bpd) in mid-February.
At the same time, a three-year pact between OPEC and non-OPEC partners to curb oil output ended on Wednesday (1), paving the way for oil producers to ramp up production.
Oil refiner China National Chemical Corp said in February that it would close a 100,000 bpd plant and cut processing at two others amid falling fuel demands.
The International Energy Agency expects oil demand in the first quarter to fall for the first time in 10 years before picking up in the second quarter. The agency cut its full-year global growth forecast to 825,000 bpd.