The spike in global oil prices that preceded the Great Recession is being repeated. Just three years ago, the price of oil futures on the New York Mercantile Exchange hit $100 a barrel for the first time ever, bringing dire warnings about looming economic hardship.
Sure enough, the world economy entered its worst downturn since the Depression just months after oil prices peaked at a record $147 a barrel in July 2008. Now the doomsayers are back, as oil futures crept above US$ 106 a barrel this week - their highest level since 2008.
The Lanka Indian Oil Company (LIOC), a unit of Indian Oil Corporation says it will be compelled to wind up operations in Sri Lanka unless the government takes measures to revise fuel prices, as the world oil prices have risen up to US$106 to 107 per barrel, according to a top official of the company.
The company is continuing to make losses amounting to Rs.15 per litre on petrol and Rs.20 on diesel and under this set up its operations will break-down sooner than later, LIOC managing director Suresh Kumar told the Business Times. He said that the company has made a request from the government to increase fuel prices at least by Rs.20 per litre of petrol to offset the losses incurred by them in selling petrol at Rs. 115 per litre and diesel at Rs.73 per litre.
He revealed that the government’s action to reduce the excise duty on petrol by Rs. 20 is not sufficient to cover the losses they are incurring due to the sale of diesel at a very low price. The LIOC has brought down a consignment of 18 million litres of petrol on January 8 while the duty reduction came into effect on January 11.
Therefore the company had to clear the consignment paying the previous excise duty, he said. It is losing heavily and has asked Sri Lanka's Petroleum Ministry permission to raise petrol and diesel pump prices, he added.
Minister of Petroleum Industries Susil Premajayantha told the Business Times that Ceylon Petroleum Corporation (CPC) will not increase fuel prices as the excise duty reduction is sufficient to cover its losses for the next three months.
The CPC refines about half of its requirement within the island and it pays less tax as refined imports are taxed higher than crude oil. He noted that the LIOC can make an appeal to the Treasury to get a refund for the excess money they paid as excise duty for their latest consignment of petrol as there was a few days difference between the effective date of the duty reduction and the date of importation. |
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