• Says no immediate fuel price change domestically but predicts that oil crisis impact could linger till Sept.
• To test oil samples from alternative countries including Nigeria 

The Ceylon Petroleum Corporation (CPC) said that it is planning to take necessary measures if any possible fuel crisis arises in the future due to the ongoing conflict and escalating tensions in the Middle East.

The decision comes days after the United States directly entered the Israel-Iran war, by bombing three key Iranian atomic-energy installations, and issued an ultimatum to Iran to return to negotiations. 

Following the unprecedented attack, global oil prices jumped yesterday (23) to their highest levels since January of this year, as the United States’ (US) weekend move to join Israel in attacking Iran’s nuclear facilities stoked supply concerns, Reuters reported. Brent crude futures were up Cents 72, or 0.93%, to US Dollars ($) 77.73 a barrel as of 08.06 Greenwich Mean Time. US West Texas Intermediate crude advanced Cents 71, or 0.96%, to $ 74.55.

On 22 June night, it was reported that the Iranian Parliament approved a measure to close the Strait of Hormuz in response to a recent US military strike. This strait is a vital passage through which around 20% of the world’s oil and gas supplies flow. From a global economic perspective, few places are as strategically important as the Strait of Hormuz. The waterway, located between the Persian Gulf and the Gulf of Oman, is only 21 miles wide at its narrowest point. It is the sole shipping route for crude oil from the oil-rich Persian Gulf to the rest of the world. Iran controls its Northern side. About 20 million barrels of oil – roughly one-fifth of daily global production – flow through the strait every day, according to the US Energy Information Administration, which has called the channel a “critical oil chokepoint”. This includes major exporters such as Saudi Arabia, Iran, and the United Arab Emirates.

Analysts predict that global oil prices may continue to rise in the coming weeks. Energy analysts reported that US-based Goldman had warned yesterday that the price of Brent crude oil could surge to $ 110 per barrel if the situation escalated. 

Responding to an inquiry regarding how the situation would affect Sri Lanka, the CPC stated that there would be no immediate change in domestic fuel prices. However, the CPC said that it is planning to take necessary steps to manage the situation if the crisis escalates. It predicts that the impact of the emerging global oil crisis could linger into August and September. As part of its contingency measures, the CPC also plans to test oil samples from several alternative countries, including Nigeria, in case of disruptions to traditional supply chains.

Speaking to The Daily Morning yesterday, CPC Managing Director Dr. Mayura Neththikumarage said that the CPC is currently in discussions with other parties to purchase fuel. He also stated that the CPC is taking every possible measure to address any potential disruptions in the fuel supply. “We are currently in talks to enter alternative markets. At present, there is no shortage or disruption in the supply. However, it is wise to be prepared for any situation. We will issue a statement in the coming days,” he said.

Meanwhile, economic analysts have urged the Government to take immediate action to address the potential impacts of the crisis. Professor of Economics at the University of Colombo, Dr. Priyanga Dunusinghe shared the following thoughts on the matter: “On the one hand, this situation may lead to inflation. On the other, the country may incur an additional cost of around $ 500 billion due to rising global prices. The Government should prioritise diversifying exports and implementing the necessary policies to broaden foreign exchange sources. In particular, the Government should take steps to immediately implement the Economic Transformation Act.”