FINANCIAL CHRONICLE – In response to escalating global oil prices and increased import volumes, Sri Lanka has implemented its fifth fuel price increase since the onset of the Middle Eastern conflict. The adjustments, effective from May 31, were announced by the state-run Ceylon Petroleum Corporation (CPC), which raised the price of Auto Diesel by Rs. 15 to Rs. 407 per litre. Additionally, the price of Octane 92 petrol has been increased by Rs. 24 to Rs. 434.
Moreover, Super Diesel will now cost Rs. 478 following a Rs. 20 hike, while Octane 92 (Super Petrol) has seen a rise of Rs. 25 to Rs. 495. Kerosene prices have also increased by Rs. 20 per litre, bringing the new price to Rs. 285. These current rates mirror those seen during the economic crisis of 2022.
Since the escalation of the conflict on February 28, Auto Diesel prices have surged by 47 percent, while Octane 92 has experienced a 49 percent increase and Kerosene prices have jumped by 57 percent over the past three months. Sri Lanka’s limited storage capacity has forced the nation to purchase fuel at elevated prices.
In April, the fuel import expenditure soared to US$886 million, more than double that of the previous year, with the country already having utilized approximately 53 percent of last year’s total oil import costs within the first four months of this year. The combination of a worsening situation in the Middle East and a depreciating local currency has led to significant fluctuations in Sri Lanka’s retail energy prices in recent months.
To adhere to stringent International Monetary Fund (IMF) guidelines that prohibit state-subsidized utility losses, the CPC, along with private retailers such as Sinopec and Lanka IOC, has passed on the effects of global supply chain disruptions directly to consumers.
For the general populace, these constant increases in energy costs have resulted in a severe depletion of household finances. The rise in fuel prices has triggered an inflationary wave, as Auto Diesel is essential for the operation of domestic supply chains. Consequently, wholesale transportation and distribution costs from agricultural centers, such as Dambulla, have effectively doubled, leading to significant increases in the prices of everyday goods, including groceries, vegetables, and rice.
Private bus operators, school transport services, and three-wheeler associations have implemented fixed fare increases, thus imposing a significant financial burden on daily commuters. The regularity of these fuel price shocks has destabilized short-term inflation expectations, prompting local retailers to preemptively raise prices in anticipation of further transport cost hikes.
As utility expenses rise concurrently, ordinary citizens are finding their purchasing power severely diminished by essential transportation and utility costs, exacerbating the challenges faced in the government’s efforts for macroeconomic stabilization and creating a severe daily struggle for survival.
