Sri Lanka may not be facing a national fuel shortage, but a widening gap between private-sector distribution and State capacity is creating a new vulnerability in the country’s energy supply system.
The Ceylon Petroleum Corporation has moved to reassure motorists that adequate stocks are available and that current prices can be maintained until the end of October. CPC Chairman D.J. Rajakaruna has also said the Corporation expects to maintain fuel supplies and prices over the next three months, provided there are no major unforeseen disruptions.
Hitherto the need for such reassurance itself highlights the fragility of the present situation.
The problem, according to CPC, is not a national depletion of stocks but a reduction in supplies from other fuel companies. This distinction is important because Sri Lanka’s fuel distribution structure has changed significantly since private international operators entered the market.
Lanka IOC, Sinopec and RM Parks now account for a substantial portion of the distribution network. Their decision to reduce supplies because of the gap between regulated prices and actual import costs has shifted additional responsibility back to CPC.
The numbers are revealing.
Auto-diesel distribution has reportedly been reduced by 45% by Lanka IOC, 66% by Sinopec and 48% by RM Parks. The result has been localised shortages and longer queues at some privately operated stations.
CPC has responded by increasing supplies to affected areas.
Rajakaruna said approximately 62 locations where shortages could potentially develop had been identified about three weeks earlier. Arrangements were subsequently made to increase supplies to those areas.
The Corporation has also moved to secure two additional fuel shipments, while importing volumes above October requirements as a precaution.
On the surface, this appears to be prudent contingency planning. But from a wider economic perspective, it raises a deeper question: how sustainable is it for the State to repeatedly compensate when private distributors reduce their market exposure?
The answer becomes more complicated when the country’s import bill is considered.
Sri Lanka spent US$4.07 billion on fuel imports during the first eight months of 2026, a 61.6% increase from the US$2.52 billion recorded during the same period last year. This enormous increase means that maintaining adequate physical stocks requires considerably greater foreign exchange resources.
At the same time, the Government has intervened to limit the impact on consumers. The latest price revision lifted Petrol 92 to Rs.414 per litre, Auto Diesel to Rs.392 and Super Diesel to Rs.528. A US$126 million Auto Diesel subsidy has also been provided to cushion the impact of international prices.
This creates a dangerous policy triangle.
If prices are kept below full cost, private distributors may reduce supplies. If private distributors reduce supplies, CPC must fill the gap. If CPC assumes a larger share of distribution, the State becomes more exposed to the financial consequences of international oil-price movements.
CPC Chairman Rajakaruna has therefore urged motorists not to panic-buy fuel, warning that unnecessary stockpiling could itself create queues and localised pressure.
His assurance that there is “no issue with fuel stocks” is important. But stock availability today does not eliminate tomorrow’s risk.
Sri Lanka’s real challenge is no longer merely securing fuel. It is creating a pricing and distribution system in which CPC, private companies, consumers and the Treasury are not constantly transferring the same energy risk from one balance sheet to another.
