"Furnace oil is where we make the biggest losses," minister Premjayantha said.
The petroleum utility makes large profits and the Treasury collects high percentage of taxes from petrol.
Refined petroleum was about 92 rupees in the Singapore market Friday (114.15 US dollars a barrel) but is retailed in Sri Lanka at prices far below cost.
Refined diesel is about 99 rupees a litre (122.8 US dollars a barrel) in the Singapore market but is retailed at only 115 rupees a liter.
The latest price increase widens the gap between underpriced diesel which is used by business and luxury SUV owners and overpriced petrol which is used by small car and motorcycle owners.
Motorcyle users and car users effectively end up subsidizing buses, including those used for tourist transport, and even trucks used in export industries and construction as well as fishing boats.
Bus owners however are a powerful lobby group.
Sri Lanka does not have a fair and transparent cost-based price formula for refined petroleum and prices are raised on an ad hoc basis by rulers.Underpriced energy funded with bank loans, which are ultimately accommodated by central bank credit (printed money) causes frequent balance of payments trouble in Sri Lanka leading to currency depreciation and inflation.
In Sri Lanka there is a peculiar belief that inflation is related to petroleum prices - specifically diesel - despite repeated evidence to show that manipulating energy prices with central bank credit causes both inflation to go up and currency to depreciate.
In most low inflation countries, diesel is priced higher than petrol and the prices change daily.
Opposition groups also oppose fair and transparent pricing when it is attempted.
In February the current administration partly corrected the diesel mis-pricing as part of efforts to recover from balance of payments trouble, but the elected political genre that is currently in opposition heavily criticized the move.
Analysts have said that cost-based pricing is needed to ensure economic stability as well as social justice. Next year Sri Lanka's Public Utilities Commission is expected to take-over petroleum prices after enabling legislation is passed.
The World Health Organization has also published research that diesel engine emissions are carcinogenic.