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