As the oil hedging controversy rolled on for the 5th week running, the local office of a Middle East national oil company suggested that the government should quickly clinch fixed rate contracts with oil companies at current prices to benefit from falling prices.
“We are prepared to sign an agreement with the government or Ceylon Petroleum Corporation (CPC) to provide fuel at a fixed rate based on current prices,” said Roshan de Silva, local agent for the UAE state-owned Emirates National Oil Co (ENOC).
Mr De Silva, also General Manager of UAE-based Olympic Group of Companies, told The Sunday Times FT that his company is prepared to provide oil at a fixed price for one year – based on present levels. “Hedging (to protect against losses for ENOC) will be done with another company … so the government needn’t worry about prices,” he said adding that if the contracted price is for example $50 per barrel, it will remain so for 12 months in this proposed contract.
Mr De Silva, who says he has over 20 years experience in trading in oil products, noted that nobody expected the market to fall this much. “Everyone expected the prices to stop at $90 but the recession the world over has affected prices. So one can take advantage now and ensure the consumer gets a better price,” he said.
The ENOC representative says the government need not negotiate only with them but could float an open tender. “Let the government call for bids and select the best option ensuring that the consumer gets the best deal,” he said.
He believes crude prices are unlikely to go below $40 and suggests that the mechanism proposed should deal with a segment of the oil imports, not the fully quantity. “Today the delivered (landing in Colombo) prices of diesel oil is Rs 55-60 per litre and even if you add taxes, it can be sold at much cheaper than now prices.” |
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