Experts urge fuel rationing despite assurance by President

Experts are urging the Government to ration fuel given the worsening situation in the Middle East pushing oil prices above $ 90 per barrel.

“If the Government does not start rationing fuel, we will be starved of fuel in around 20 days,” they claimed.

Last week, the country’s fuel stock came under discussion at the Treasury.

Analysts charged that the Government appears clueless on the critical situation that exists on fuel and gas supplies. “They think fuel and gas come from Singapore and Korea,” they added. 

It was speculated that supplies from Iran, a major energy source which is under US and Israel attack, will be under severe stress for the foreseeable future. Major importers such as China and India are also facing challenges of sourcing. 

“Crisis planning has to be done now and not in 20 days,” pointed out analysts.

The cautioning and calls for rationing comes despite President Anura Kumara Dissanayake last week assuring Parliament that Sri Lanka has sufficient fuel stocks at present, despite the escalating conflict in the Middle East, and outlining a schedule of incoming shipments to ensure uninterrupted supply.

He said diesel stocks are adequate for 33 days under prevailing consumption levels, while petrol inventories are sufficient for 28 days. A tanker carrying 35,000 metric tons of petrol is expected to arrive on 7 or 8 March, which he said would extend petrol availability to around 40 days.

The President further detailed confirmed cargoes scheduled from RM Parks on 14 March, Sinopec on 17 March, and the Indian Oil Company (IOC) on 21 and 28 March, noting that all relevant confirmation agreements for these shipments have been secured and the necessary operational mechanism has been put in place. Shipments, he said, are planned in line with tank capacity and drawdown rates.

Explaining operational constraints, the President said the principal limitation is storage capacity. 

Excluding IOC-operated tanks in Trincomalee, combined storage capacity at Kolonnawa and Muthurajawela is approximately 150,000 metric tons. However, facilities cannot maintain full capacity at all times and are managed in line with scheduled shipments. At the time the crisis arose, approximately 103,000 metric tons were in storage. The refinery supplies around 1,080 metric tons daily, with total daily fuel requirements, including aviation fuel, amounting to approximately 1,800 metric tons.

Petrol storage capacity stands at 161,087 metric tons. At the onset of the current crisis, 136,270 metric tons were available in storage. No separate strategic reserve is maintained, and operational and reserve stocks are held within the same facilities, requiring careful management.

Daily aviation fuel demand is included within the overall requirement of approximately 1,800 metric tons, of which 1,080 metric tons are produced by the refinery and the balance imported. Existing aviation fuel stocks are sufficient for 49 days.

Crude oil inventories are adequate for 26 days, with a further shipment currently at sea expected to provide an additional 18 days of refinery operations, enabling refinery activity for a total of 44 days even under a worst-case scenario in which no additional vessels arrive.

The President also detailed the infrastructure developments needed to improve fuel storage capacity.

Last week, oil surged 35% for the biggest gain in futures trading history dating back to 1983.

Qatar Energy Minister Saad al-Kaabi told The Financial Times on Friday that crude prices could reach $ 150 per barrel in the coming weeks if oil tankers were unable to pass through the Strait. This could “bring down the economies of the world,” al-Kaabi said.

Price of WTI Crude rose by 12% to $ 90.90 and Brent Crude by 9.5% to $ 92.69 according to oilprice.com.

The Trump administration on Friday announced a $ 20 billion insurance program for oil tankers in the Persian Gulf, though the measure did little to calm the crude market.

Iraq has shut down 1.5 million barrels per day of production, two Iraqi officials told Reuters last week. Kuwait has also started cutting production after running out of storage space, people familiar with the matter told The Wall Street Journal on Friday.

JPMorgan Head of Global Commodities Research Natasha Kaneva told clients in a Friday note that production cuts could approach 6 million barrels per day (MMbpd) by the end of next week if the Strait is not open to traffic. JPMorgan expects the United Arab Emirates (UAE) to show supply constraints next week.

Fitch Ratings on Friday said the effective closure of the Strait of Hormuz, the key driver of oil price increases following the 28 February outbreak of the Iran conflict, is likely to be temporary given its vital economic role.

“This, alongside global oil market oversupply, should limit oil price rises and mitigate any potential disruptions to Iranian oil supply. We do not expect significant upside to our December 2025 assumption of an average Brent oil price of $ 63/bbl for 2026,” Fitch said.

Prior to the conflict, around 20 million (MMbpd) of crude oil and petroleum products transited the Strait, accounting for about a quarter of global seaborne oil trade and a fifth of global oil consumption. About half of the oil volumes transported through the Strait are exports from Saudi Arabia and the UAE, with the remainder from Iraq, Kuwait, and Iran. About half of these exports go to China and India. A protracted closure would affect both exporting and importing countries and therefore is not its baseline assumption. 

If the Strait were to remain effectively closed for a protracted period, naval protection for tanker navigation could be considered, as occurred during the 1980s Iran-Iraq war.

In addition, the global oil market is oversupplied, which should limit the geopolitical risk premium and cap risks to oil price increases. Global supply growth exceeded demand growth in 2025. Fitch expects this trend to continue in 2026. 

Supply increased by about 3 MMbpd in 2025, while demand grew by well below 1 MMbpd. Fitch forecasts supply growth of 2.4 MMbpd in 2026, with demand growth of about 0.8 MMbpd. Half of 2025-2026 supply increases come from unaffected non-Organisation of Petroleum Exporting Countries (OPEC)+ producers. OPEC+ spare production capacity is 4.3 MMbpd.

While Iran is a sizeable oil producer, producing about 3.5 MMbpd and exporting about 2 MMbpd, it accounts only for about 3.5% of global crude oil production. This means that potential supply disruption would be offset by global market oversupply.