Friday June 26, 2026 8:26 pm ECONOMYNEXT – Despite a reduction in global oil prices, Sri Lanka will not be able to reduce fuel prices due to term tenders, Deputy Finance Minister Anil Jayantha said. “If we can stop the term tenders and go for spot tenders, then of course, the pr…
Friday June 26, 2026 8:26 pm
ECONOMYNEXT – Despite a reduction in global oil prices, Sri Lanka will not be able to reduce fuel prices due to term tenders, Deputy Finance Minister Anil Jayantha said. “If we can stop the term tenders and go for spot tenders, then of course, the price would come down. But it is not possible. They are in respecting the procurement processes,” the Deputy Minister told reporters at a media briefing on Friday. “Because with the term tender, some of the stocks that will come in a couple of months’ time are based on the last month’s the prices and not the current prices.” Sri Lanka has raised the fuel prices around 50 percent since the Middle Eastern escalation started on February 28. Term tenders or long-term contracts function as strategic, long-term legal partnerships aimed at securing supply certainty over a prolonged horizon, typically spanning six months, a year, or even multiple years. In a term tender, the buyer secures a guaranteed volume commitment from a supplier to ensure consistent, scheduled deliveries over the contract period. The pricing is rarely fixed; instead, it is bound to a dynamic mathematical formula tied to international energy benchmarks (such as S&P Global Platts) plus an agreed-upon fixed premium or differential. This model protects the buyer from structural fuel shortages, streamlines port logistics, and ensures the country’s grid or factories never run out of base inventory, though it risks locking the buyer into rigid obligations if market demand crashes. Spot tenders, on the other hand, operate on a transactional, “buy now, deliver immediately” basis designed to fulfill urgent, non-recurring, or immediate shipment needs, typically within days or weeks. Rather than building an ongoing relationship, a spot tender is an open auction where the buyer seeks the lowest immediate bidder to cover a temporary gap or exploit a sudden dip in international prices. While oil prices have cooled significantly from more than US$ 130 highs due to positive negotiation headlines, top investment banks and the Energy Information Administration (EIA) warn that true price stabilization will depend entirely on physical proof, whether oil tankers actually resume safe, unhindered passage and global inventories begin to rebuild over the next quarter. (Colombo/June 26)