No local fuel price revision anytime soon: Will absorb burden as long as Govt. can, Gammanpila
Denies reports of no fuel price revision for next three months
Regardless of escalating global oil prices, local fuel prices which have not been revised since September 2019 would be maintained at their current levels as long as the Government can absorb the cost, The Sunday Morning Business learns.
Disputing media reports that rule out a local fuel price revision for the next three months, Minister of Energy Udaya Gammanpila stated that he is uncertain of how long the Government could absorb the rising cost of global oil prices, thereby neither confirming nor denying a fuel price revision after three months.
Nevertheless, he added that the rapid phase of a global oil price hike is discouraging the Government to absorb the costs further.
“Because of the pandemic, people are pressed with an increasing cost of living and loss of income. If you look at the producers, they have lost their international markets. So increasing fuel prices means increasing the cost of living, which means they will lose international markets. We do not want our producers to lose their remaining foreign orders,” Gammanpila added.
Bloomberg last week reported that oil jumped the most in more than a week after a US government report showed a record drop in domestic fuel inventories from the aftermath of a deep freeze that shuttered refineries in several states.
“Crude futures in New York climbed 2.6% on Wednesday (3), snapping a three-day streak of losses. US gasoline inventories tumbled last week by the most since 1990 after a polar blast wiped out more than 5 million barrels a day of refining capacity in late February along the US Gulf Coast, according to Energy Information Administration data. Crude stockpiles swelled with refineries still shut,” it added.
In January this year amidst rising global oil prices, Gammanpila told us that the local prices of fuel would be revised this year only when the global oil prices decline to a certain extent, marking the first fuel price revision of the current Government.
According to the Minister at that point, the wait for global oil prices to go down comes amidst the Treasury’s cash-tight position to pump money into the stabilisation fund to absorb the financial burden of the consumers if the fund and the formula are to be implemented at a time global oil prices are high.
The current Government that was elected in November 2019 abandoned the fuel pricing formula which was introduced by the previous Government. In fact, the current Government is yet to announce its first fuel price revision. The local oil prices were last revised in September 2019, under the monthly fuel pricing formula. Under this formula alone, fuel prices were revised about 19 times based on both scientific and political reasons.
Oil prices hit negative levels when the pandemic spread outside of China in the first half of last year. Nevertheless, the Sri Lankan Government maintained fuel prices without reducing them to reflect the change in the global oil market, but pledged it would pass down the benefits in the form of reduced grocery prices. As pledged, the prices of groceries were reduced, but these returned to its previous levels in a few weeks.