No fuel hike immediately - Fowzie

Minister of Petroleum and Petroleum Resources Development A.H.M. Fowzie said fuel prices will not be increased immediatley but the Ministry will use hedging and other market tools to keep prices stable. He was addressing a meeting in connection with the profits of over US$ 5.4 million made by the Ceylon Petroleum Corporation (CPC) last month by oil hedging.

The Minister said the country has gained over US$ 10 million from six oil hedgings that commenced early last year and that the money was used to reduce CPC losses and maintain price stability.

“The Ministry has taken steps to minimise waste and curtail malpractices in the CPC and increase profits. The Sapugaskanda oil refinery will be upgraded with assistance from Iran”, he said.

Fowzie said that it will not be a surprise if fuel prices hit US$ 175 per barrel this year and that many countries are resorting to oil hedging to reduce losses. Despite the gains by oil hedging the CPC has incurred a loss of Rs. 7,815 million this year.

The Ministry will commence marketing lube oil, gas and bunker fuel this year. Tenders have been called for 40,000 gas cylinders and with the requisite number of cylinders the CPC will market gas at a cheaper rate.

“Tenders have been called for oil exploration in Mannar and the company that gives the highest returns will be offered the contract”, the Minister said.

He said that he will present a framework on sharing losses by member countries at the OPEC conference to be held in Italy. The conference will be on the dialogue between the producer and consumer.

“Stability of oil prices is essential for democracy to survive. If oil prices continue to rise causing a burden to countries people will rise against governments and help to set up dictatorship regimes”, he said.

CPC Chairman, Asantha de Mel said the CPC opted for the lowest hedging so that the risk will be less if fuel prices drop in the global market.

Oil hedging is a dangerous game and it is not rewarding, he said.

The CPC commenced oil hedging with the Citi Bank, a leading provider of hedging solutions to manage high oil prices. LF