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LPG demand drops by double-digit percentages

10 Oct 2022

 
  • Laugfs’ overall demand drops by 25-30%, confirms Chairman 
  • Says no official assessment conducted to find exact figure
  • Litro confirms demand drop by 7-12%, but says picking up by 2-3% now
By Imesh Ranasinghe  Overall demand for liquefied petroleum gas (LPG) cylinders in Sri Lanka has dropped by 25-30% in the last few months, despite price reductions, due to the rise in inflation and the use of alternative energy sources, sector officials said. Speaking to The Morning Business, Laugfs Holdings Chairman W.K.H. Wegapitiya said that although no official assessment has been done to find an exact figure of the reduction of LPG demand, based on the consumer information Laugfs Holding has received from the other sectors in which it is operating, the overall demand of the LPG sector in Sri Lanka has reduced by 25-30%. He added that the main reason for the reduction in demand is the increased cost of living due to rising inflation. Also, speaking to us, Litro Gas Chairman Muditha Peiris said that in the past month alone, the demand for its LPG cylinders reduced between 7-12%, but with the recent price decrease last week, the demand has started to pick up between 2-3%. He opined that people were expecting a price reduction, so they did not purchase cylinders until the prices were reduced, and added that the demand will thus further develop in the coming weeks. Moreover, he said the reduction in the demand initially occurred due to shortages in the market, as for 6-12 months, LPG availability in the market was in question, which led people to use alternative energy sources. Further, he said people have no option besides LPG now, as LPG has become the cheapest and most affordable source of energy when compared to firewood, electricity, and other alternative energy sources for cooking purposes. Peiris said that based on their calculations, considering the pricing of a pack of firewood, especially in the Western province, and the recent increase in electricity prices, LPG appears to be a far more cost effective option than before. Since August, Litro has reduced the price of a 12.5 kg LPG cylinder from Rs 4,910 to Rs 4,280, based on a pricing formula introduced, which sees prices revised on a monthly basis. According to Peiris, the recent price reductions were mainly due to the reduction in global LPG prices and the cutting down of the operational cost at Litro Gas Lanka. “We had to curtail certain expenses such as marketing in order to give the best benefit to the consumers at the lowest price and make sure we adhere to all the Government and audit regulations as well. So we saved quite a bit of money by doing that,” he said. Wegapitiya said that Laugfs will also reduce its prices in the coming weeks, but it expects the global LPG prices to increase with the upcoming winter season. Rising supplies of LPG from the Middle East since May, along with steady exports from the US and Africa ahead of winter, have dragged Asia LPG prices down from 18-year highs in March, while total exports from Qatar, the UAE, Saudi Arabia, Kuwait, and Iran are estimated to rise to 38.9 million metric tonnes (MT) in 2022, from 36.5 million MT in 2021. However, last week’s decision by the Organisation of the Petroleum Exporting Countries (OPEC) and non-OPEC allies, a group often referred to as OPEC+, to reduce production by 2 million oil barrels per day from November in a bid to increase the plummeting oil prices is expected to increase the LPG prices, along with the demand expected for the upcoming winter season.  


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