Fuel prices in Sri Lanka are expected to rise by August due to global market volatility driven by the ongoing conflict between Israel and Iran, a senior official said.
Iran, which supplies around 3% of global oil, plays a crucial role in the global energy market, and disruptions in the region are already impacting crude oil prices.
Although Sri Lanka currently purchases fuel from Singapore-based companies, discussions are ongoing with the UAE for a new supply agreement, though no deal has been finalized yet.
As tensions escalate in the Middle East, Brent crude rose by 0.5% to approach USD 75 per barrel, while US crude climbed 0.7% to USD 73.42 before Brent eased slightly to USD 73.78.
The official noted that the immediate impact on local fuel prices would be limited, as current stocks were purchased at earlier, lower rates. The anticipated hike will affect future orders.
Sri Lanka follows a cost-reflective fuel pricing formula, with monthly revisions, meaning global price fluctuations directly influence local fuel costs.
Dr. M. Ganeshamurthi, Senior Lecturer in Economics at the University of Colombo, warned that rising global fuel prices would likely increase Sri Lanka’s overall cost of living.
He pointed out that insurance premiums and other supply chain disruptions in the Middle East could drive prices up significantly.
Dr. Ganeshamurthi also highlighted the asymmetry in price adjustments, noting that local product prices often increase quickly when fuel prices rise but rarely drop when fuel prices fall.
He cautioned that although the Central Bank has targeted inflation at 5% for the next two quarters, fuel price hikes could cause inflation to exceed those expectations.
