World oil price drops rapidly, but immediate relief ruled out here

By Bandula Sirimanna

Despite a rapid drop in world crude oil prices, the Ceylon Petroleum Corporation (CPC) and Lanka IOC say they cannot immediately bring down fuel prices as losses are still mounting.

This week, according to prices quoted by the Central Bank based on international quotes provided by the global industry, crude was trading in the range of $99 to $96 per barrel, much lower than the $140-$150 per barrel seen some months back.

CPC Chairman Ashantha de Mel told The Sunday Times that a fuel price revision could be considered by the end of this year if the oil price continues to drop at present levels. However he said that losses were still mounting and the CPC has bought diesel at $134 per barrel.

“A litre of diesel – with the need per month being 145 million litres --, costs Rs.122 even before it is imported without adding freight and other costs,” he said. He added that there is still a Rs.33 loss, on diesel and the loss on kerosene was Rs.68 per litre. The CPC makes a small profit from petrol sales, he said. Mr. de Mel said “under this set-up the CPC is not in a position to bring down fuel prices as it was facing financial difficulties and was also supplying oil to the Ceylon Electricity Board and to the military.

The Sunday Times reliably learns that the CPC is following a complicated fuel pricing formula aimed at giving CPC time to reduce its cost of operations and it also included certain costs like VAT, excise duties and so on which CPC has to pay the Government. The maximum calculated consumer price is fixed by adding freight charges, insurance, jetty and pipe line charges, Ports and Airports development levy, LC charges, Customs duty, social responsibility levy, marketing and distribution cost, provincial council tax on imported refined products, dealer margin, etc.

Meanwhile LIOC Managing Director K.Ramakrishnan said that the Sri Lankan Government’s imposition of import duty of Rs 7.50 a litre on petrol and Rs. 24 a litre on diesel had an impact on the company’s local operations. He added that the profit from the sales of diesel was marginal due to this reason.

He said LIOC had purchased stocks of petrol and diesel sufficient for two months at the rate of $133 per barrel and $145 per barrel, respectively.

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