President Anura Kumara Dissanayake has signalled that further fuel price increases may become unavoidable if global oil prices continue to rise, warning that the current subsidy-driven pricing system is placing an unsustainable burden on the Ceylon Petroleum Corporation (CPC).
Addressing the Nuwara Eliya District Special Coordinating Committee weeks after the latest fuel price revision, the President said the Government’s objective was to reduce fuel consumption and noted that while the actual cost of a litre of diesel had surged due to global market conditions, the Government was still absorbing a subsidy of nearly Rs. 100 per litre as the CPC continued to incur heavy losses.
The remarks came amid growing public frustration over Sri Lanka’s latest fuel price hike, with many questioning whether better planning and fuel reserve management could have reduced at least part of the burden now falling on consumers.
While the Government and the CPC insist that the increases are a direct consequence of soaring international oil prices linked to the Middle East crisis and global supply instability, growing concerns remain over whether the country’s limited storage capacity and crisis management failures have made fuel prices rise faster and more frequently than necessary.
The latest revisions pushed octane 92 petrol prices to around Rs. 400 per litre, more than double the prices seen before the country’s economic collapse.
CPC stance
According to CPC Managing Director Dr. Mayura Neththikumarage, however, the actual market-driven price of petrol under current global conditions could have exceeded Rs. 700 per litre if the Government had not intervened through subsidies and CPC cost absorption mechanisms.
He maintained that Sri Lanka was still selling fuel at comparatively lower rates than several developed economies despite facing one of the worst foreign exchange crises in its history.
Dr. Neththikumarage pointed out that while Sri Lankan consumers were currently paying around Rs. 392–410 per litre for petrol, equivalent prices in countries such as Australia remained significantly higher, at nearly Rs. 588 per litre even after recent reductions.
He also noted that several oil-producing nations, including Canada, the United States, and Saudi Arabia, had increased domestic fuel prices as global crude prices surged beyond $ 100 per barrel following tensions linked to the Iran conflict and disruptions in the Strait of Hormuz, one of the world’s most critical oil shipping routes.
‘Shielding customers’
According to the CPC, the current global fuel shock has created unprecedented pressure on import-dependent economies.
International crude oil prices, which averaged around $ 70–80 per barrel before the crisis intensified, climbed sharply to over $ 100–115 per barrel during peak periods of instability. The increase represented a global crude price surge of nearly 40–60% within a short period.
Despite criticism over rising prices, the CPC insists that Sri Lanka is still partially shielding consumers from the full impact of global oil prices.
According to Dr. Neththikumarage, the Government and CPC are currently absorbing a substantial portion of the actual fuel cost through subsidies and financial support mechanisms.
He stated that while the actual market price of octane 92 petrol was estimated to be around Rs. 432 per litre, it was currently being sold at approximately Rs. 410, with the CPC itself incurring losses on certain fuel categories.
The CPC Managing Director also defended the country’s pricing adjustments by arguing that even nations with significantly larger fuel reserves and domestic oil production had failed to avoid fuel price increases.
According to him, while stronger reserves may temporarily delay sudden increases, no country can permanently maintain artificially low prices when international crude oil prices remain elevated for prolonged periods.
“If it is a short-term surge, countries can absorb it through reserves. But this is a prolonged crisis. Even if we had a three-month stock, after that period we still have to import according to world prices,” he explained.
Storage capacity concerns
However, the issue of Sri Lanka’s limited fuel storage capacity has emerged as a major point of public debate.
Analysts note that countries with larger strategic fuel reserves are often able to moderate sudden price shocks because they can temporarily rely on stored supplies rather than immediately purchasing fuel at peak international prices.
Several countries across Asia and Europe have already expanded strategic reserves and introduced fuel stabilisation measures in response to continuing global volatility. Australia, for example, recently announced a multi-billion-dollar fuel security package aimed at increasing its national reserves from roughly 43 days of supply to 50 days over the coming years.
Economists argue that although larger reserves alone cannot permanently prevent price hikes during prolonged global crises, stronger storage capacity combined with early demand management measures can reduce panic buying, stabilise supply chains, and slow the frequency of price adjustments.
The debate has therefore shifted from whether prices should increase at all to whether Sri Lankan consumers are paying more than necessary because of weak preparation and delayed crisis management.
Social impact
The social impact of the fuel hikes has also intensified because incomes have failed to keep pace with inflation and rising living costs.
Sri Lanka’s inflation rate exceeded 70% at its peak during the economic crisis, among the highest in Asia at the time. Transport and food inflation were particularly severe because fuel costs directly affect logistics, electricity generation, and public transportation.
Although Sri Lanka’s nominal fuel prices remain lower than some developed economies when directly converted into rupees, affordability remains far weaker because household incomes are significantly lower.
Poor planning and mismanagement
Against this backdrop, prominent petroleum sector trade unionist Ananda Palitha has alleged that poor planning and fuel reserve mismanagement significantly worsened the shortages and price pressures experienced in Sri Lanka during the early stages of the Middle East crisis.
According to Palitha, CPC storage facilities were not even 45% filled when tensions in the Middle East escalated towards the end of February, leaving the country vulnerable to sudden supply disruptions and price volatility.
“The CPC knew the storage capacities and the risks involved, but instead of managing the situation carefully, it released fuel to the market without restrictions, which directly fuelled panic buying,” he alleged.
Palitha argued that this ultimately forced authorities into emergency procurement measures at significantly higher prices. “The crisis became so severe that the Cabinet eventually had to consider buying fuel even through black-market channels to meet possible shortages,” he claimed.
He further argued that authorities should have immediately introduced the fuel quota system once the first signs of international instability emerged, instead of allowing unrestricted sales to continue.
“There would not have been such a major shortage if the fuel quota system had been implemented at the very beginning of the crisis,” he said.
Referring to later comments made by CPC officials themselves, Palitha noted that even the CPC leadership had acknowledged that panic buying had accelerated the pressure on prices. However, he insisted that the root cause was not consumer behaviour alone but the Government’s failure to properly manage the crisis from the outset.
“Later, even the CPC Chairman admitted publicly that if consumers had not engaged in panic buying of fuel, the price hike could have been delayed. But the real fault lies with the Government’s failure to manage the situation properly from the beginning,” he said.