Research Korner: Price Controls

Determinants Of Oil Product Retail Price In Sri Lanka

DETERMINANTS OF OIL PRODUCT RETAIL PRICE IN SRI LANKA         For more than 15 years now the demand for oil and petroleum products has been increasing at least 5% annually in Sri Lanka. Currently the demand of Sri Lanka in crude oil is about 2 Million tons every year because they are highly relying in oil imports as much as 100% of their present requirements while additionally they are also relying 50% of their petroleum needs from other countries. This has been the cause of economic recession and most of the countries in all around the world has been affected and the government of Sri Lanka is faced with such challenges, oil prices in international market is ever increasing since January of 2007 it has the highest ratings that rises up to 7 USD per barrel, good thing that it slipped down in its regular price up to 2008 for USD. There are various reasons why the price of oil per barrel is ever changing and this may serve as a determinant in its current standing in price of oil.       One of the biggest reasons is the global demand, this highly increases the prices expectedly when countries around the world has been competing to get their supplies, the natural tendency is increase in prices. By 2025 Asia is expected to consume at least one third of the world oil demand and the world will need at least 107.8 million barrel of oil per day according to the Organization of the Petroleum Exporting Countries (OPEC).  One of the biggest demands of oil in the government of Sri Lanka is their needs for power production and electricity generation that they hardly need petroleum fuel in generation. It is necessary for their government to have requisite stocks in crude oil and petroleum so that they can answer the needs and demand of their industry in private and public sector.       The environmental concerns in Asian economies also favored fuel in production demand that causes the increase of oil during 2008 and most of the economy of Asia and other regions do not have enough sources of supplies and so most of them are dependent on other countries. The continuous environmental disasters in most Asian continents including the earthquake in Japan typhoon in the Philippines, spread of diseases in China and other environmental conditions in Asia has also poses a threat in oil price increase in Sri Lanka. The weakening of US dollars, the shortages of oil reserves in the USA and Europe and the political tensions in neighboring countries in Iran, India, Russia and Nigeria and migration of new risk capital becomes a commodity market that even increases the prices of oil all this are generally the reasons but there is a particular plan in controlling the oil price product retail in Sri Lanka.       Particularly Sri Lanka has made a deal with the International Monetary Fund (IMF) but one of their conditions includes that they should have to introduce automatic pricing in petroleum products, this means that there should be no subsidy and the prices of petroleum products should be adjusted depending on the fluctuation in world market pricing directly to the consumers in 2001 but still kerosene and diesel is still subsidized because ordinary citizens may not be able to afford such high cost of products. This automatic policy has been abandoned in 2004 but it has also been re-implemented because of the consumption of the country at large may be affected they have also sold petrol below the automatic price and it is still exercised as of this current times. As of 2011 the price of Petrol is Sri Lanka Rs. 50.30 per liter, Diesel is Sri Lanka Rs. 34.37, Kerosene is Sri Lanka Rs. 24.67.       The quest for energy needs has been a long time problem in most Asian region, Sri Lanka believed that they are going to need at least trillion US dollars investment to meet their needs in energy until 2030 and most of the countries in Asia including Japan, China and Korea has been harnessing the alternative sources of energy to meet their demand although most of their alternatives cost too much. Wind energy and Nuclear power plant including wind turbine, photovoltaic energy can also be an option and this can produce a more reliable and environment friendly energy and so the country in Sri Lanka although their alternative sources is more modest. The government has advice their people to cut down the use of oil through reduction of public and private transportation, protect the environment, reduce the congestion and do some exercise. Alternatively they have also some projects of hydro energy, wind power and biomass, they are hoping that this project can cut cost their burden in oil products dependency in import consumption by at least 10% if the project continues.    References: http://www.petroleummin.gov.lk/about-us/facts-and-figures-statistics  http://www.ips.lk/news/newsarchive/2005/18102005_cma_con/oil%20prices_181005.pdf  http://www.stockfuture.in/2011/09/which-country-price-of-petroldiesel-is.html              Interesting News Credit:ivythesis.typepad.com

Determinants Of Oil Product Retail Price In Sri Lanka

DETERMINANTS OF OIL PRODUCT RETAIL PRICE IN SRI LANKA For more than 15 years now the demand for oil and petroleum products has...