When Sri Lanka suffered the worst economic crisis in its history and the fuel shortage brought the country to a standstill, tens of thousands of people from all over the country gathered in front of the presidential palace in Colombo to demonstrate angrily, demanding the dismissal of leaders who failed to lead the country out of economic disaster.
On July 15, the speaker of the Sri Lankan parliament abewadna announced that President Gotabaya had officially submitted his resignation. According to the constitution, Prime Minister Vikram masinha was sworn in as “acting president”. When Pereira, a 42 year old taxi driver, learned the news at a gas station not far from the parliament, he was queuing for fuel.
According to CCTV news, on July 20 local time, Sri Lanka’s parliament held a vote to elect a new president, and interim president Vikram masinha was elected as Sri Lanka’s new president.
Wen Lu, researcher of outlook think tank in Colombo
Editor | Pu Haiyan outlook think tank
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one
Days without fuel
A few days ago, because there was no fuel and no bus, Pereira and his companions walked several kilometers to Colombo to participate in the protest movement. “I hope to wake up the government and solve our economic difficulties. Although President Gotabaya has stepped down, now I still need to face the reality and continue to queue for fuel.”. Pereira, who has stood in line for six hours, said.
On June 9, 2022, motorcyclists lined up on the streets of Colombo to buy fuel. Issued by Xinhua News Agency (photographed by Tang Lu)
“Sri Lanka has only one day’s gasoline inventory.”
“Sri Lanka spends $500 million or $600 million a month on fuel, and it must find fuel worth $3.3 billion in the next six months.”
“Sri Lanka’s economy is facing a complete collapse, and no country or organization in the world is willing to provide fuel for it.”
Viklamasingha, who was Prime Minister a few weeks ago, has been issuing various warnings about the energy outage caused by Sri Lanka’s foreign exchange depletion.
For Sri Lankans, queuing to buy gasoline, diesel, kerosene, natural gas and other fuels has become a daily part of life in 2022: husbands line up in vehicles, wives and children line up in another line. Because I don’t know how many days to wait, many family sized liquefied gas tanks are usually placed near gas stations to “watch”.
On June 10, 2022, in Colombo, Sri Lanka, people lined up to buy liquefied gas by placing liquefied gas tanks on the roadside. Xinhua News Agency / France News Agency
At first, people used to complain about waiting in line for two to three hours a day. Now if they can get fuel through waiting in line for six to ten hours, they will be thankful. The most regrettable thing is that the fuel queue can also become a “killer”, which gave birth to a new term “queue death”. At present, 16 victims have appeared in the “queue death” list.
On the streets of Colombo on June 9, 2022, a motorcycle driver poured the remaining gasoline into the bottle during the interval of the queue in order to refuel more. Issued by Xinhua News Agency (photographed by Tang Lu)
Due to the serious shortage of fuel, the state-run Ceylon oil company completely stopped providing fuel to private cars and only provided fuel to necessary service departments:
The lack of fuel made the transport fleet almost inoperable, and the public transport system began to collapse;
Some supermarkets and stores cannot replenish their shelves because they have no fuel, so the public generally feels the scarcity of necessities and the consequent price rise;
The inflation rate is over 60%, and many families can no longer maintain three meals a day;
Many hospitals suspend important operations because doctors and nurses cannot ensure work;
If basic services cannot be guaranteed, the life of other departments and industries will be even more difficult:
Fishermen said that the fuel received was not enough for long-distance fishing. If there was not enough fuel to go back and forth, some people might be trapped in the sea;
The head of the tea industry, which brings foreign exchange income to Sri Lanka, warned that “if sufficient fuel stocks are not received in the next few days, all tea factories in seven regions of the country may be closed”;
International flights are an important force supporting Sri Lanka’s tourism industry. Unable to refuel in Sri Lanka, some international airlines plan to cut the seat capacity to Sri Lanka by half or even announce the suspension of flights;
Some embassies in Sri Lanka even announced that they would have to close their embassies or reduce consular services because staff members could not go to work on time;
Several cemeteries on the outskirts of Colombo have cancelled cremation operations due to the depletion of liquefied petroleum gas.
two
From the beginning to the overall crisis
The fuel crisis caused by the shortage of foreign exchange has seriously affected Sri Lankan society and exacerbated the country’s economic difficulties. The rising international crude oil price makes many people doubt whether fuel shortage will become a part of daily life. Sri Lankan officials have predicted that it will take at least seven months to end the country’s current fuel and natural gas queues.
The uncertainty of the political situation makes the fuel arrangement uncertain. At a press conference held on July 16, Sri Lanka’s minister of electricity and energy, vijasekla, disclosed that a ship with 90000 tons of crude oil that was originally scheduled to arrive on July 15 refused to come to Sri Lanka because of concerns about payment and political unrest in Sri Lanka.
So far, what people can expect is that the distribution of liquefied natural gas has been restored. Vijasekla also said that a series of fuel ships will arrive in recent days, and the government has paid the full cost. However, given that similar information has been released many times in the past, people said that they would no longer easily believe any promises of the government until they saw the fuel.
On June 6, 2022, motorcycles, cars and large vehicles queued up to buy fuel, occupying the whole road. Issued by Xinhua News Agency (photographed by Tang Lu)
In fact, Sri Lanka has experienced various types of fuel shortages from time to time in the past, but that is mostly a short-term behavior caused by various human factors.
This large-scale fuel shortage began to appear as early as the beginning of 2022. At that time, it was mainly due to the shortage of cooking gas, which then turned into a shortage of diesel oil. By February and March, it began to threaten the power supply. The government announced that in order to ensure the smooth supply of electricity, it was necessary to implement the power cut and power rationing. Therefore, the daily power outage time increased from twoorthree hours to fiveorsix hours or even more than 10 hours. Later, shortages of diesel, gasoline, kerosene, furnace oil, liquefied natural gas and other phenomena began to occur one after another, until after May, it evolved into a comprehensive fuel crisis.
On June 10, 2022, “tututuche” meandered for 2 to 3 kilometers in an alley waiting to buy fuel. Issued by Xinhua News Agency (photographed by Tang Lu)
In this regard, the energy department of Sri Lanka explained that the easing of the pandemic situation led to the growth of power demand, the resumption of economic activities, including tourism, and the natural gradual increase in energy use, resulting in the daily demand for diesel oil from the original daily average of 6000 tons to 9000 tons. They said that people are also avoiding public transport out of concern about the COVID-19, which has led to an increase in the demand for various kinds of gasoline in private cars.
On June 10, 2022, after school, her daughter accompanied her father who drove the “sudden car” to wait for fuel to go home. Issued by Xinhua News Agency (photographed by Tang Lu)
Earlier, the explanation of government officials can still make people dubious: considering that the first quarter of Sri Lanka is the driest season of the year, and hydropower generation is insufficient before the showers in April and the monsoon in May, Ceylon Power Bureau, which is responsible for Sri Lanka’s power supply, must carefully use the stored fuel to generate electricity, and the blackout time will be shortened after the rainy season.
However, the subsequent situation showed that despite the rainy season, the power generation situation of Ceylon Electric Power Bureau was still not substantially improved due to the frequent fuel shortage.
The background affecting power supply is very complex, one of which is that the standard way for the authorities to deal with fuel shortages is to use scarce and expensive imported oil for power generation. This was not a problem before, but at the moment of the shortage of foreign exchange, it fell into a serious dilemma: foreign exchange is limited, and the fuel that can be imported is naturally limited. Is it the priority of electricity or the vitality of the transportation sector?
On June 9, 2022, my father and his daughter, who had just left school, walked through the streets of Colombo between the bus waiting in line for fuel and the motorcycle. Issued by Xinhua News Agency (photographed by Tang Lu)
Ceylon Petroleum Corporation (CPC), which supplies fuel to Ceylon electricity authority, is also suffering. Due to the shortage of foreign exchange, it is impossible to buy enough dollars in the market, so it is impossible to use dollars to buy fuel. According to government legislation, Ceylon oil company is a state-owned enterprise in Sri Lanka mainly responsible for oil import, sales and distribution. It is reported that Ceylon oil company lost 551 million Sri Lankan rupees a day due to the rise in international fuel prices in February.
As the Sri Lankan rupee fell sharply from 1 to 200 US dollars (the official fixed exchange rate previously adhered to by the Central Bank of Sri Lanka was liberalized in early March) to less than 300 rupees per US dollar, it means that Ceylon oil company needs to find more rupees to buy US dollars, and the way to obtain rupees is nothing more than printing money. Although printing money is the most reluctant thing for the Central Bank of Sri Lanka, in order to prevent the collapse of the country’s fuel supply, the central bank can only act accordingly.
Until Ceylon finds enough dollars, even if the tanker arrives, it cannot ask for unloading. Some experts have questioned Ceylon oil company’s failure to buffer inventory in time. In response, the company said that Ceylon oil company could maintain fuel inventory for two to three weeks in the past, but now the inventory has fallen to fiveorsix days or even only oneortwo days.
On June 9, 2022, a Ceylon oil tanker was driving on the streets of Colombo. Issued by Xinhua News Agency (photographed by Tang Lu)
In the past, relying on the trust between the Bank of Sri Lanka and the supplier, the supplier could allow Sri Lanka to pay US dollars within a few days after the fuel ship arrived at the port for unloading. With the increasingly severe economic crisis in Sri Lanka, especially after the Ministry of Finance announced the suspension of foreign debt repayment on April 12, Sri Lankan enterprises can no longer enjoy any convenience in importing fuel. It is reported that at the time when Sri Lanka needed fuel most, many oil tankers loaded with fuel arrived at Colombo port, but no oil tanker agreed to unload rashly without receiving the exact payment in US dollars.
three
The government did everything it could
At several press conferences held recently, senior officials of Sri Lanka and the head of Ceylon oil company disclosed many difficulties of Sri Lanka in purchasing fuel:
Due to the low sovereign rating of Sri Lanka, foreign banks no longer accept the credit guarantee certificate (LC) issued by local banks, so it is difficult to open LC for fuel purchase. At the end of last year, an oil tanker left Sri Lankan waters for about 70 days due to the failure to issue a letter of credit.
As Ceylon oil company is mired in hundreds of millions of dollars of debt, foreign companies are unwilling to continue to provide fuel to Sri Lanka, which is the main reason for the current serious fuel shortage. Some of the latest gasoline shipments ordered by Sri Lanka have been cancelled because suppliers require an advance payment even before the ship arrives in Sri Lankan waters.
Sri Lanka has been unable to find the $600million monthly fuel import fee, so fuel consumption must be reduced to about $350million per month. At present, Sri Lanka imports natural gas at a monthly cost of $40million. Sri Lanka will need us $250million in natural gas in the next six months.
Although there is money to buy diesel, it is difficult to find a ship to transport fuel. Indians told Sri Lankan senior officials that “even if there is US dollars, it is not necessarily guaranteed that you can buy fuel”. The world oil market has become a “seller’s market, not a buyer’s market”.
Considering the shortage of foreign exchange stocks, Sri Lanka has begun to prepare for possible fuel shortages since the second half of 2021. One option is to obtain fuel imports through credit lines obtained from foreign countries.
In late October 2021, the Sri Lankan cabinet approved a $3.6 billion oil credit line from Oman, but because it could not meet the relevant conditions put forward by Oman, it finally abandoned this tempting huge agreement in January this year.
Subsequently, two fuel credits worth US $500million and US $200million from India became the most solid backing for Sri Lanka to purchase fuel stocks. However, after the fuel credit line ran out, India announced that it would stop buying gasoline and diesel on credit to Sri Lanka. In early July, after four Indian fuel cargoes arrived in Colombo, the Indian side requested that fuel be supplied to Ceylon oil company only after Ceylon oil company paid an advance payment.
Seeing the decreasing fuel stocks, in order to solve the urgent need, the cabinet of Sri Lanka urgently approved a proposal to allow companies in oil producing countries to import oil and start retail business in the country. Ceylon oil company announced that any company can provide guaranteed fuel quotas to Ceylon oil company as long as it pays us dollars. At the same time, the Sri Lankan government has recently sent envoys to Middle East countries and Russia to seek fuel supplies from these countries.
The most striking of these is the appeal to Russia. A few days ago, Sri Lanka sent a high-level delegation to Russia. Gotabaya also called Russian President Putin and hoped that Russia could provide credit support for Sri Lanka’s imported fuel. However, even if it imports fuel from Russia, Sri Lanka also faces the problem of being unable to issue a credit guarantee (LC).
four
It also has something to do with the “car complex”
While the government is struggling to find fuel, Sri Lankans are also trying to tide over the difficulties.
On June 12, 2022, a man carrying a pile of wood walked on the streets of Colombo. Issued by Xinhua News Agency (photographed by Tang Lu)
A month ago, the author used to track people who rode bicycles on the street, and found that at that time, the people who used bicycles could be basically classified into three categories: the poor, bicycle enthusiasts, and a small number of delivery couriers. Now, seeing that the fuel problem is becoming increasingly unsolved, some office workers are considering using bicycles that do not need fuel as an alternative means of transportation.
On April 23, 2022, the bullock carts running on the streets of putram became popular after the fuel crisis. Issued by Xinhua News Agency (photographed by Tang Lu)
While adopting various ways to solve the fuel crisis, the local media can see people’s self reflection on Sri Lanka’s fuel crisis from time to time, “As a country, we pretend to live a lifestyle far beyond our ability and wealth. As a third world country, Sri Lanka has been willfully consuming fuel resources like the first world. Before the 1980s, many people went to school by bus. Now we are used to driving or taking a minibus to pick up children from school, but there is no doubt that this is unsustainable in the future.”
To be honest, most Sri Lankans would not have thought about these issues if it were not for this fuel crisis. It may be that cars have entered Sri Lanka for a long time, which makes the people of this island country with a population of 22million have an obvious preference for cars, which is exactly “car complex”. Walking on the street, you often encounter an “old car” speeding by. Several “classic car” clubs of different brands often hold intercity classic car cruises on weekends.
On September 5, 2020, classic car enthusiasts participated in the classic car parade in Colombo, Sri Lanka. Issued by Xinhua News Agency (photographed by Ajit Pereira)
Although the roads have not been significantly widened over the years, and the tax on vehicle purchase has increased year by year (Sri Lankan cars are mostly imported), this still cannot stop the enthusiasm of Sri Lankan car lovers. Sri Lanka’s per capita annual income is less than 4000 US dollars, but its per capita number of vehicles ranks first in South Asian countries. According to the Ministry of transport of Sri Lanka, there were 157 cars per 1000 people in 2019. Data show that Pakistan and Nepal have 111 and 110 vehicles per 1000 people (2018), while India has 45 vehicles per 1000 people (2016).
Sri Lanka needs to spend a lot of money on fuel every year due to the huge car ownership. At present, fuel is the largest single imported product of the country. According to the research of Dr. kumarag, Professor of moratuva University, Sri Lanka spent an average of US $3.394 billion annually on imported necessities such as food and beverages, dairy products and drugs from 2014 to 2018, while an average of US $3.269 billion was spent annually on fuel imports in the same period. This shows that Sri Lanka spends more on fuel imports than on other necessities.
A local friend who specializes in car import business told the author that imported cars have always been selling well in Sri Lanka. On the one hand, there is a market, and the government can also levy higher tariffs on imported vehicles. With the encouragement of the government, Sri Lanka’s imported vehicles surge every year, fuel consumption expands rapidly, and the traffic congestion in big cities is serious. According to a recent data released by the International Monetary Fund, Sri Lanka is one of the countries with the slowest road speed in the world. At present, the average speed of roads in Sri Lanka is 50 kilometers per hour, while the average speed of Colombo roads is less than 15 kilometers per hour. At this rate, fuel consumption will double, and the resulting economic losses will rise sharply.
five
Start the quota system and save money
It is against this background that the country’s knowledgeable people put forward that it is urgent to formulate a demand plan that meets the supply, and the public must reassess their travel needs.
With the increasingly serious fuel shortage, the charge of “sudden bus” has become increasingly high. The author consciously experienced taking Colombo bus for many times. Practice has shown that as long as you avoid rush hours, it is actually very convenient to take the bus. There are many routes and clear signs. The key is not only environmental protection, but also cheap.
On June 15, 2022, a railway station in Colombo. Because there is no fuel, the train has become an important means of transportation for people. It is extremely crowded during the commuting hours, and many people hang it on the door. Issued by Xinhua News Agency (photographed by Tang Lu)
If the government can consciously improve the service quality of buses and make the development of buses more modern and convenient, rather than focusing on promoting the increase of privately owned vehicles, fuel consumption will naturally slow down.
For Sri Lanka at present, the top priority is to ensure funding for the country’s basic fuel. Vijasekla recently told local media that the Central Bank of Sri Lanka and the Ministry of finance have informed the Ministry of electricity and energy that the country will no longer be able to obtain $600million in fuel imports per month, and in the future, only about $150million to $200million in national funds per month can be used to import fuel for transportation, industry and power generation. He urged the public to reduce personal fuel consumption and make more use of public transport.
It is against this background
Next, the Ministry of electricity and Energy announced the launch
National fuel quota system. The public can apply for a fuel pass and obtain fuel regularly through standardized distribution. Vijessekla said that the two-dimensional code plan of the national fuel pass will be implemented throughout the island on July 25. From July 21, the QR code and the last digit of the QR code license plate will be tested in Colombo. All registered vehicles will refuel according to the last digit of the license plate on different days of the week. At present, 1million people have registered on the national fuel pass system.
In fact, since this year, the Sri Lankan government has introduced many solutions to alleviate the fuel shortage, but each solution failed because it could not ensure sufficient fuel distribution. Therefore, it remains to be seen whether the newly launched national fuel quota system can be effectively implemented.
It is believed that the new president will resolve the fuel crisis with the utmost determination and by any available and feasible means, which is not only related to people’s lives, but also to the overall development of Sri Lanka’s economy.