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Fuel price fund to be revived after initial failure

15 Feb 2022

 
  • Gammanpila says will ‘give it a try’ amid escalating oil prices
  • Global oil prices rise to seven-year high
  By Madhusha Thavapalakumar As global oil prices hit a seven-year high last week and with the Ceylon Petroleum Corporation (CPC) not being permitted by the Ministry of Finance to increase local fuel prices, Minister of Energy Udaya Gammanpila plans to submit a cabinet proposal for a new fuel price stabilisation fund. “I am planning to suggest that the Government introduce a fuel price stabilisation fund again. I will give it a try. It is the decision of the Cabinet of Ministers to decide how to get money to establish this fund,” Gammanpila told The Morning yesterday (14).   Once implemented, the fund will protect the consumers from immediate shocks of fluctuating global oil prices. When the global oil prices increase exponentially, under this fund, it would not be passed on to the consumers as the extra cost would be paid from the fund. Similarly, when the prices decrease in the global market, the fund will collect the profit from importing fuel at a lower price while maintaining the local oil prices to use as a buffer when prices increase.  Reuters, last evening reported that oil prices were steady yesterday in seesaw trading, after hitting their highest in more than seven years over fears that a possible invasion of Ukraine by Russia could trigger the US and European sanctions that would disrupt exports from one of the world’s top producers. Brent crude was down 11 cents, or 0.1%, at $ 94.33 a barrel, after earlier hitting a peak of $ 96.16, the highest since October 2014. However, the CPC is yet to decide whether to increase its local prices, which were last revised in December 2021, even though Lanka Indian Oil Corporation (LIOC) early this month increased its prices.  LIOC increased its retail selling prices for both diesel (Lanka Auto Diesel) and petrol (LP 92) by Rs. 5 per litre each. However, the prices of Lanka Super Diesel and LP 95 are unchanged. The losses are around Rs. 40 per litre on a sale of diesel and Rs. 20 per litre on a sale of petrol at the current international prices. LIOC stated that the last price revision took place on 12 June 2021. However, since then, the Brent crude oil prices have increased from $ 72 per barrel to $ 86 per barrel in the international market.  As of December 2020, the Fuel Price Stabilisation Fund that was introduced in March that year was inactive, with collections to the fund being temporarily suspended due to the recovery in global oil prices.  The Ministry of Finance imposed an additional duty per litre of fuel sold by LIOC and the CPC following the local outbreak of the pandemic as the Government decided to maintain fuel prices despite the historical drop in global oil prices. Therefore, the aforementioned institutions were able to sell oil with a widened profit margin. This additional duty was channelled directly to the Fuel Price Stabilisation Fund.


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