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Sri Lanka IOC unit asks for price increase to cut losses

Jan 22, 2011 (LBO) - Sri Lanka´s Indian Oil Corporation unit says it is losing 9 rupees a liter on petrol and 21 rupees a liter on diesel by selling fuel at government controlled prices as world commodity prices continued to rise.

LIOC managing director Suresh Kumar was quoted as saying the news portal that that the firm sold 16 million litres of petrol a month and 27 million litres of diesel.

Sri Lanka taxes petrol in particular heavily the state arbitrarily adjusts taxes at midnight or forces petroleum utilities to run losses, to manipulate oil prices.

Petrol for example is sold at 115 rupees a litre with taxes though the Singapore refined price was only 73.7 rupees a litre (106.3 US dollars) this week according to official data. Diesel and Kerosene, the most expensive fuels are underpriced in Sri Lanka.

The refined price for a litre of diesel in Singapore was about 76 rupees this week (109.6 US dollars) and kerosene was 77 rupees (111.2 US dollars).

There is a strong belief among rulers in Sri Lanka that inflation is a diesel phenomenon rather than a monetary one which is shared by some members of the public.

In 2004 Sri Lanka jettisoned pricing formula and printed money heavily to fix oil prices and drove inflation to levels seen in oil producing countries like Venezuela. Venezuela´s inflation was 26.9 percent in November.

Global commodity prices, including food, minerals, base metals, oil and precious metals are rising due to ´quantity easing´ (excessive money printing) by the US Federal Reserve which is weakening the US dollars.

For more than a 100 years prior to the creation of the Fed gold was 20 US dollars an ounce.

Within 20 years of the creation of the semi-state entity the Fed depreciated its paper to 35 dollars an ounce after triggering an economic bubble in the 1920s and plunging the world into a depression. In 2008 it happened again.

In 1971 the Fed went completely off the gold standard firing massive oil shock and commodity bubble with gold rising above 80 dollars an ounce. Gold is now 1,300 dollars an ounce.

Posted on Monday, January 24, 2011 @ 09:19:38 LKT


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