Private fuel companies have reduced supplies while motorists increasingly turn to CPC filling stations. Sri Lanka opened its fuel market to competition to reduce the burden on the State. So why is the State once again being required to carry the market?
Sri Lanka has seen this picture before: vehicles lining up outside filling stations and motorists wondering whether the next station will have fuel.
But this is not 2022.
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There is fuel in the country. The problem now appears to be who is prepared to sell it, at what price and who ultimately carries the loss.
Energy Minister Kumara Jayakody told Parliament that private petroleum companies have reduced supplies because the prevailing regulated retail prices make sales commercially difficult.
The numbers are substantial. Compared with February, Lanka IOC’s auto-diesel releases have reportedly fallen by around 45 percent while Sinopec’s diesel supply has fallen by approximately 66 percent. Reductions have also been reported across other petroleum products.
The consequence is predictable. Consumers who cannot obtain fuel from private operators migrate towards Ceylon Petroleum Corporation filling stations.
CPC must then increase supply.
That raises a question Sri Lanka should have anticipated when it liberalised the petroleum market.
Competition works when companies compete for customers. It works rather differently when competitors can reduce supply because margins are unattractive and the State-owned company must ensure that the country keeps moving.
Sri Lanka brought new international operators into the petroleum market after the catastrophic shortages of 2022. The argument was persuasive. Greater competition would diversify supply, reduce dependence on CPC and introduce private capital and commercial discipline.
But competition cannot mean private operators participate when margins are attractive while CPC assumes the national obligation when they are not.
There is another complication.
The Government has intervened to cushion consumers from higher international petroleum prices. That is understandable when fuel prices feed directly into transport costs, food prices, electricity, production and inflation.
But somebody pays the difference.
If the consumer does not pay it at the pump and the private supplier will not absorb it, the cost ultimately moves elsewhere in the system. If CPC carries that burden, Sri Lanka risks recreating precisely the financial weaknesses that previously left State-owned enterprises accumulating enormous losses.
There is no suggestion that private operators should be compelled indefinitely to sell fuel at a loss. Nor can Sri Lanka simply expose households and businesses overnight to every movement in international oil prices.
The problem is therefore not solved by choosing one side.
It requires a pricing mechanism that is transparent, commercially sustainable and capable of protecting genuinely vulnerable consumers without quietly transferring an unlimited liability back to the taxpayer.
Sri Lanka did not liberalise the petroleum market merely to change the logos above filling stations.
It did so because the old system failed spectacularly.
If CPC is once again becoming the supplier of last resort whenever the economics become uncomfortable, then the Government needs to explain what competition in Sri Lanka’s fuel market actually means.
