Playing Safe

Sri Lanka’s foreign reserves have fallen to US$ 1.9 bn in October due to higher oil imports, but the government is still fighting shy to hedge its crude imports, Treasury Secretary said. Sri Lanka’s foreign reserves have fallen to US$ 1.9 bn in October due to higher oil imports, but the government is still fighting shy to hedge its crude imports, Treasury Secretary said. The government procures around oil 3.5 mn MT of petroleum products a year mainly from Saudi Arabia, Iran and Malaysia. Price per barrel is usually about US$ 2 less than spot prices, explains Dr. P B Jayasundara.

Ceylon Petroleum Corp. (CPC) which is used to buying oil at around US$ 30 per barrel, is now paying about US$ 50. For an oil dependent nation, Ceypetco has never considered hedging its purchases, due to administrative bureaucracies, Jayasundara told a reporters on Friday.

National carrier, SriLankan Airlines too opted out of the futures game after a few months, due to difficulties in managing the process. The airline is now taking a serious look at it, as its rivals weathered the oil shock after hedging their purchases.

Besides its complex nature, Jayasundara says oil prices are expected to tumble t