Bangladesh should adopt a portfolio approach buying manageable volumes from multiple reliable sources. The most practical options are nearby refining hubs such as Singapore, Malaysia and Indonesia. writes Mostafizur Rahman
BANGLADESH is facing an oil shock that is not of its own making, but how it responds will determine how deep the damage goes. The latest tensions around the Strait of Hormuz and the Bab el-Mandeb Strait have exposed a hard truth that Bangladesh’s energy system is too dependent, too narrow and too vulnerable. When these routes are disrupted, oil does not just become costly it becomes uncertain.
This is now a classic economic shock. Bangladesh is facing a terms-of-trade pressure, meaning it must spend more foreign exchange for the same amount of fuel. That puts pressure on reserves, deteriorates the currency and gradually spreads across transport, electricity, food and industry. What begins as an oil issue quickly becomes a whole economy concern. Recent global reports already show shrinking energy markets and increasing pressure on importing countries like Bangladesh. So, the response cannot be slow or symbolic; it must be practical, targeted and real.
The first decision Bangladesh must take is to change how it sources fuel. This is not the time to depend on any single alternative supplier. That approach is risky and unrealistic in the current environment. Instead, Bangladesh should adopt a portfolio approach buying manageable volumes from multiple reliable sources. The most practical options are nearby refining hubs such as Singapore, Malaysia and Indonesia. These countries export refined fuel like diesel and furnace oil, which Bangladesh can use directly. The routes are shorter, more stable and less exposed to conflict. In a situation like this, reliability matters more than small differences in cost.
At the same time, Bangladesh should make full use of its regional connectivity to secure fuel through land-based and short distance routes. Existing cross border supply arrangements are already in place and can be expanded further. Additional supply through rail and coastal movement can also be supported. These routes reduce exposure to risky maritime chokepoints and ensure a more stable and timely flow of fuel. Developing such regional supply channels is the most immediate and workable solution in the present situation.
The second major decision is to reduce exposure to volatile markets specially LNG. Bangladesh has relied heavily on spot purchases, which become very unpredictable during global disruptions. This creates sudden fiscal pressure and forces difficult trade-offs. The solution is clear; expand long term LNG agreements with multiple suppliers. Even if the terms appear slightly less flexible in normal times, they provide stability when markets are under stress.
The third decision is about managing foreign exchange carefully. Fuel imports are now competing with other essential needs for limited dollars. This means priorities must be set clearly. Fuel supply must be protected, while less essential imports should be managed carefully. At the same time, the government should actively pursue external financing and supplier credit arrangements to ease short term pressure. In economic terms, this is about protecting vital imports during a balance of payments challenge.
At home, the government must move from broad measures to smart allocation of fuel. Not all consumption has equal importance. Fuel should be directed first to power generation, agriculture, export industries and public transport. These sectors support growth, employment and food supply. On the other hand, non-essential use, especially private consumption, should be moderated. This is not only about saving fuel it is about protecting the economy.
In addition, short term demand management should be handled carefully but definitely. Reducing office hours, introducing staggered work schedules and temporarily expanding weekly holidays can help lower fuel use without stopping economic activity completely. These measures reduce pressure on transport and electricity demand during peak times. At the same time, strict monitoring is essential to prevent hoarding and artificial shortages. Fuel stations, depots and supply chains must be closely supervised and illegal stockpiling should face immediate action. Without strong monitoring, even a manageable supply situation can quickly turn into a crisis.
Equally important is avoiding large, untargeted subsidies. While subsidies may offer short-term relief, they are costly and often inefficient. Bangladesh does not have unlimited fiscal space. Instead, support should be targeted helping transport, agriculture and essential services while permitting conditions to reflect reality in less important areas.
Another urgent gap is fuel storage. Bangladesh does not have enough reserves to manage supply disruptions smoothly. As a result, even a short delay in imports can create anxiety in the market. The country should invest in building a modest but effective reserve, especially for diesel and furnace oil. This will act as a buffer and give policymakers time to respond in a planned way rather than under pressure.
Finally, managing expectations is important. In times of uncertainty, panic buying and hoarding can make the situation worse. Clear communication, strong monitoring of supply chains and strict action against illegal stockpiling are essential. When people trust that supply is being managed properly, panic reduces and stability returns.
The oil shock is a warning. Bangladesh cannot control global events, but it can control how it prepares and responds. A diversified sourcing strategy, stronger regional supply links, stable contracts, better reserve management and smart domestic allocation can reduce vulnerability. Without these steps, every global disruption will continue to create pressure on supply, costs and economic stability.
The decisions taken now will not only determine how Bangladesh manages this moment they will determine how it faces the next crisis.
Mostafizur Rahman is an economist at North South University.
