MediumVI Energy Politics & Supply Security2 November 2026, Monday
Sri Lanka raises fuel prices again as inflation stays above band
State-owned Ceylon Petroleum Corporation raised 92-octane petrol by 10 rupees to 424 rupees a litre on 2 November, and super diesel by 15 rupees to 543 rupees. Inflation, at 8.3% in October, stayed above the 7% band for a fourth consecutive month.
According to EconomyNext, 95-octane petrol rose by 15 rupees to 490 rupees and auto diesel by 5 rupees to 397 rupees, while kerosene was unchanged at 285 rupees. Ada Derana reported on 2 November that bus and three-wheeler taxi operators had reacted to the increase. The government had raised fuel prices by about 50% after supply shortages caused by the escalation in the Middle East; the previous increase took effect on 1 October.
The inflation data show the impact of the price rises. Annual inflation on the Colombo Consumer Price Index rose from 8.0% in September to 8.3% in October, a 40-month high. Food inflation, at 8.8%, is the highest since May 2023, and core inflation rose to 5.6%. Restaurants and hotels together with transport accounted for 87% of the monthly increase. The central bank manages a 5% target with a band of ±2 percentage points and expects inflation to remain in the high single digits until the first quarter of 2027.
The supply squeeze is not confined to liquid fuels. LPG distributor LAUGFS said on 3 November that, owing to Hormuz-related supply disruption, it expects three shipments in November, the first arriving on 12–14 November. The company is seeking temporary approval to use the 30,000-tonne Hambantota terminal for the domestic market for three months; approval has not yet been granted. According to Ada Derana, rival Litro Gas has ordered 44,000 tonnes of LPG for November. No figure for the war-risk insurance premium on the LPG route could be verified.
Talay assessment
Bottom line
Sri Lanka's energy shock is moving from the pump price into inflation expectations. The 2 November increase and the LPG shortage could keep inflation, above 7% for four months, elevated in November as well. The central bank is watching whether expectations become unanchored; the most likely path is unchanged rates with the door to tightening kept open.
Likely effects
- Household budgetsNegativeWeeks
Because transport and restaurants carry 87% of the monthly increase, the fuel price rise passes straight into fares and food prices.
- Monetary policyNegative1–6 months
A fourth straight month above the band raises the risk that the central bank's return to its 5% target slips beyond the first quarter of 2027.
- Cooking-gas supplyNegativeWeeks
Without Hambantota approval, a cooking-gas shortage will strain households and small businesses until the 12–14 November shipment arrives.
Possibilities, ranked
- 1Rates on hold, inflation near 8%55%
The central bank stays on hold, November inflation remains around 8%, and LPG shipments ease the shortage towards month-end.
Watch: End-November Colombo inflation data and the central bank's rate decision
- 2Further tightening30%
Core inflation keeps rising and the central bank judges that expectations have slipped, raising its policy rate.
Watch: Core inflation exceeding 6% and the tone of the central bank's statement
- 3Relief from cheaper oil15%
A fall in global oil prices brings pump prices down at the December revision, and inflation moves towards the band.
Watch: Ceylon Petroleum Corporation's early-December price revision
Probabilities are calibrated judgement based on the sources, not measurement, and are revised as new information arrives. Not investment advice.
Market reaction
Indicators affected
- 92-octane petrol▲ 424 rupees/litre
- October inflation▲ 8.3%
- Food inflation▲ 8.8%
Sources
- EconomyNext — Sri Lanka's fuel price hike tests central bank's inflation target (2 November 2026)
- EconomyNext — Sri Lanka inflation remains CB's upper limit for fourth straight month in Oct; rises to 40-mo high (30 October 2026)
- Ada Derana — Three LAUGFS LPG shipments expected in November (3 November 2026)