With the government struggling to manage growing panic over fuel amid the US-Israel war on Iran, the key commodity surged beyond $100 a barrel yesterday, raising fresh concerns for highly import-dependent Bangladesh.
The surge in prices will increase Bangladesh’s import costs and put pressure on the country’s balance of payments, said analysts and officials of the Bangladesh Petroleum Corporation (BPC).
In 2025, the BPC imported oil at an average price of $72 a barrel, making the current spike a major concern for policymakers.
“We are a victim of the war, which forced us to manage the crisis,” said Khondaker Golam Moazzem, research director of the Centre for Policy Dialogue, referring to the government’s recent decision to ration fuel supply.
Under the circumstances, the move to ration oil supply for a short period is reasonable, but the government should develop a clear plan for the next 15 days to one month to manage the situation.
For now, the government should avoid raising domestic fuel prices, as the BPC has the financial capacity to absorb higher costs in the short term.
The state-run corporation logged a profit of Tk 4,700 crore in fiscal year 2024–25, according to Moazzem.
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The Bangladesh Bank should maintain its current contractionary monetary policy stance to prevent the oil price shock from triggering prolonged inflationary pressure.
Ashikur Rahman, principal economist at PRI
“It is also selling petroleum at higher prices and has the capacity to absorb the extra cost in the short term,” he said, adding that tensions surrounding the Strait of Hormuz, a critical route for global oil shipments, may gradually ease if the situation stabilises.
According to the BPC officials, though they have a plan and deals with the refineries until June, the prices are determined by the international free on board (FOB) rates.
When a shipment arrives at port, the price is fixed then -- by calculating the rates of that day, the previous day and the following day.
The surge in global oil prices poses a significant challenge for Bangladesh’s macroeconomic management, said Ashikur Rahman, principal economist at the Policy Research Institute of Bangladesh.
As a net energy importer, higher oil prices will immediately put pressure on the balance of payments by increasing the country’s import bill, he said.
Policymakers will therefore need to carefully calibrate their response to ensure a stable supply of fuel while protecting the country’s foreign exchange reserves.
Under such circumstances, an upward adjustment in domestic petrol prices may become necessary to absorb part of the external shock.
“At the same time, higher energy costs can quickly transmit into broader inflation through increased transportation and production costs. This makes inflation management more complex at a time when price stability remains a key concern.”
The Bangladesh Bank should maintain its current contractionary monetary policy stance to prevent the oil price shock from triggering prolonged inflationary pressure.
Ashikur pointed to the global oil shocks of the 1970s and the price surge in 2022 as lessons for policymakers.
During both periods, countries that pursued loose monetary policies experienced prolonged inflationary spirals, while those that maintained tighter monetary conditions generally saw only temporary spikes.
“Bangladesh, therefore, needs steady and disciplined macroeconomic management to navigate these external turbulences and protect overall economic stability,” he added.
Meanwhile, the rising global oil prices could also affect electricity generation, particularly at oil-based power plants that play a crucial role in Bangladesh’s power supply.
Fuel stocks at oil-fired power plants are sufficient to sustain electricity generation until April 10 at most, according to the Bangladesh Independent Power Producers Association (BIPPA).
The warning came at a press conference in Dhaka, where BIPPA President David Hasanat and former president Imran Karim presented data on the current state of fuel supply and power plant operations.
The private-sector power plants had around 1,30,000 tonnes of furnace oil in stock about a week ago, Karim said.
Of that amount, nearly 55,000 tonnes are held by just two or three companies, while the rest is spread across various operators.
Because oil-based power plants are located in different parts of the country, fuel stocks are unevenly distributed, he said. As a result, some plants may have enough fuel to operate until mid-April, while others could face shortages sooner.
On average, the current stock can sustain oil-based power generation until April 7 to 10, Karim said.
Private-sector plants currently account for around 45-49 percent of Bangladesh’s electricity generation, making their continued operation critical for maintaining power supply.
Karim also expressed concern over delays in payments to private power producers.
Though there is no scope to delay the bills by more than 30 days, in many cases, bills are paid six to nine months late, creating significant pressure on operators to cover fuel import and operating costs.
Outstanding dues have already exceeded Tk 14,000 crore, he said, adding that although producers have the contractual right to suspend operations due to unpaid bills, domestic power producers have so far refrained from doing so.
“The country’s power sector is currently at a critical juncture,” said BIPPA President David Hasanat.
Without short-term and long-term planning, the electricity supply could face serious risks.
Maintaining investment in the sector will require stronger coordination between the government and private investors, along with clear policy direction for the future, he added.
