Sri Lanka raises fuel prices by 25%, the second hike in two weeks, as the Middle East conflict threatens energy supplies and economic recovery

COLOMBO: Sri Lanka increased fuel prices by 25% on Sunday in its second hike within two weeks. The government is bracing for further economic impact from the ongoing war in the Middle East.

Regular petrol now costs 398 rupees (USD 1.30) per litre, up from 317 rupees. Diesel, commonly used for public transport, rose by 79 rupees to 382 rupees per litre.

Last week, authorities ordered an 8% increase in retail fuel prices and introduced rationing to limit consumption. A Ceylon Petroleum Corporation official said they hope to achieve a 15 to 20% reduction in fuel use with the latest hike.

The official stated that President Anura Kumara Dissanayake warned the country must prepare for a prolonged Middle East conflict affecting energy supplies. The president also ordered a four-day working week and asked employers to reintroduce work-from-home arrangements where possible.

The Strait of Hormuz, a key waterway for about 20% of global oil exports, has been effectively closed by Iran. This retaliation against the US and Israeli war effort is now in its fourth week.

Sri Lanka imports all its oil and buys coal for electricity generation. It purchases refined petroleum products from Singapore, Malaysia and South Korea.

Crude oil for its Iran-built refinery is sourced from the Middle East. The government warns the fighting could seriously undermine efforts to recover from the 2022 economic meltdown.

Sri Lanka defaulted on its USD 46 billion foreign debt in 2022 after running out of foreign exchange. Colombo has since secured a USD 2.9 billion IMF bailout.

 The Sun Malaysia