Govt. hints at fuel price hike

Saturday, 11 February 2012 00:38 - - {{hitsCtrl.values.hits}}

By Uditha Jayasinghe

Sri Lankans may have to brace themselves for fuel price hikes as the country becomes increasingly hedged between high global prices and possible sanctions against Iran oil imports, a Minister said on Friday.

“If global prices do not decline, then we have no choice but to increase fuel prices even though that could push inflation higher,” Acting Cabinet Spokesman Minister Lakshman Yapa Abeywardana told media yesterday. He however declined to speculate as to when or by how much prices could change.

US Treasury officials met with top Ministers last week to discuss the possible impact on Sri Lanka’s post-war economy if sanctions are posed for Iran oil imports.

Iran is Sri Lanka’s largest oil supplier and the country’s only oil refinery was built to handle Iran’s high-sulphur and high-density crude oil, which means that sourcing from other destinations could be problematic.

Iran and Sri Lanka have had strong diplomatic ties since President Mahinda Rajapaksa took over but US sanctions could mean that the country will have to consider alternatives. The US is also Sri Lanka’s largest trade partner.

Reports have also hinted at Sri Lanka conducting talks with Oman to purchase oil, a point that was emphasised after the Emir toured the country at the beginning of the year to strengthen bilateral ties.

However, there have been no clear alternatives proposed and Sri Lanka spends around US$ 4 billion on oil imports annually.