Despite the fact that the price of crude oil came down to zero in April from the last year’s price of $64 per barrel in the international market due to worldwide virus pandemic, and the price has recently reached to as low as $37 to $40 per barrel; people of Bangladesh are still paying a high price for fuel oil.
Experts opined that there would have no need to increase bus fares if the government could take advantage of the 30-year low crude oil price in the international market, and on the other hand, the country also could make economic gains from the record low price of oil.
Md Anisur Rahman, Senior Secretary of the Energy and Mineral Resources Division told Bangladesh Post, “The fact is, even if the price of oil falls in the world market we are not able to take advantage of it as the oil reserve capacity of the country is low.”
“After the announcement of the general holiday from March 26 for the virus pandemic, our oil demand fell below 20 percent. As a result, we had much more oil reserves. Now again the use of oil is increasing slowly. We tried to stockpile more oil at lower prices. That's why we contacted various private companies to hire their tankers but they demanded a very high charge.
We also contacted other countries but we failed to make it. Excess oil was on the ship even after we stockpiled it in all the government oil tankers. We released one month's oil in the next month. As a result, we had to pay an additional charge, which is also a loss,” he continued.
“In spite of all this, we have stockpiled some oil at a low price. But at this moment there is no thought of reducing oil prices. However, we will make a decision considering the situation in the future. We are now trying to ensure a smooth supply of oil across the country,” he said.
Bangladesh Petroleum Corporation (BPC) sources said Bangladesh annually imports 50 to 55 lakh tons of petroleum fuel as its daily consumption demand is 17,000 tonnes. It can store 13 lakh tons of fuel in different depots across the country, equivalent to 45-50 days' demand.
The BPC has long been being criticized for having low reserves. BPC has not increased its oil storage capacity much in the last few years.
However, 21,000-ton tankers are being built in Parbatipur to increase storage. Work is underway on a project to take oil directly from the ship to the pipeline in Cox's Bazar. When these are done, 90,000 tons of oil can be stored. In addition, a project called ERL Unit-2 has been taken up, which, if completed, will be able to refine 30 lakh tons more crude oil with the first unit of ERL, which will increase the amount of reserve.
It can be mentioned here that China has the capacity to store fuel oil for one year. Neighboring India can stockpile fuel oil for six months.
Energy expert Prof Dr Ijaz Hossain told Bangladesh Post, “Most of the countries in the world, including neighboring India, adjust their oil prices to the international market. In India the price changes within two weeks if needed. But our government does not adopt this policy. If the price increases in the world market, the price of oil also increases in the domestic market.
But when the price goes down, it is not reduced. Then the government argues that we have incurred a loss before and now we recovering it through not reducing oil prices. This leads to a lack of transparency. Misconceptions are created in the minds of people.”
“So my advice is to adjust the price of oil with the international market through the commission. The government will have no role here. In addition, we need to increase our oil reserves capacity. It does not require much money. If we can increase reserves, we can take advantage of lower oil prices in the international market at different times. Like now we can't take advantage of that.”
“But many such opportunities are likely to come in the future. Because the oil price in the world market is fluctuating a lot now. We can stockpile more when the price goes down and use it when the price goes up later,” he added.
The government last fixed fuel prices in 2016 when per barrel prices of crude oil and diesel oil in the international market were $43.13 and $50.31 respectively.
Bangladesh's fuel market is determined by the government executive order driven by the international market price but Bangladesh's regulators follow only the upper trend of the market, it has never adjusted the price with downtrend excepting only one example during the caretaker government period in 2002.
No one has seen the current situation before. This was not the case even after the fragile economies of the world after the Second World War. At the end of the Second World War, in February 1948, the price of oil was $16.5 per barrel.
The price of fuel oil has been falling in the world market since the beginning of this year due to lockdown in most of the countries to prevent the coronavirus epidemic. Besides, there started an oil-price-war between Saudi Arabia and Russia. In April, US oil prices turned negative for the first time in history.
Although coronavirus is one of the reasons behind the fall in oil prices, US policy has also played a role in the fall in oil prices. In 1948, the United States enacted a law banning the production and export of oil. The country lifted the ban in 2018. As a result, the rate at which the country has begun to extract oil has surpassed that of Saudi Arabia and Russia. While Saudi Arabia produces 12.4 million barrels a day and Russia 11.4 million barrels a day, the United States produces 12.8 million barrels. This increased production is one of the reasons for the collapse of the oil market.
According to various sources, the world has the potential to store a maximum of 680 crore barrels of oil. Already 80 percent of this stock has been filled. The rest of the place will be filled with oil bought in the next one to one-and-a-half months.
The US Energy Information Administration (EIA) estimates that oil prices may rise to $30 by the middle of this year. The average oil price will stand at $34 this year. The price of oil will not rise too much soon. Next year, oil prices will rise to an average of $46.
