Experts fear that the way oil prices are rising and are likely to rise further in the international market could have a serious adverse effect on Bangladesh's economy in the coming days.
‘To overcome the worst situation, Bangladesh must have to prevent fuel oil wastage right now. Besides, it must increase the storage capacity of fuel oil as well as the use of renewable energy in the country,’ experts suggested.
International crude oil price is soaring at over $130 a barrel since the war in Ukraine, which is the highest in 14 years. It is feared that the price of crude oil could rise to $200 per barrel.
Many say the situation could be similar to the way the world economy collapsed after the oil embargo imposed after the 1973 Arab-Israeli war.
Bangladesh's Power and Energy sectors depend on imported oil. Apart from that, the government provides several subsidies to keep oil prices relatively low.
Bangladesh imports crude oil mainly from Kuwait and Qatar. How much risk can this instability in the international oil market create for Bangladesh?
Energy expert Professor Ijaz Hossain told Bangladesh Post that ‘Oil prices have risen to $130 a barrel after NATO and the United States threatened to boycott Russian oil. Since it was not implemented later, the price has come down a bit now. However, if the boycott decision is implemented, the situation will be very bad. Because Russia supplies about 15-20 percent of the oil that will be cut down. As a result, the price will increase a lot.’
‘However, the situation will not last long. We have to endure suffering for a while. But even if the situation is normal, the price of oil will remain above $100. There are no signs of a sudden drop in the prices,’ he added.
Hossain said ‘In order to deal with this emerging situation, it was necessary to increase the storage capacity of oil in the country long ago. But we could not do that. Currently, we cannot store oil for more than a month. We need to build the capacity to store oil for at least 6-8 months. If this can be done, such a situation can be easily dealt with in the future.’
‘Besides, the use of renewable energy must be increased in the country as part of a long-term plan, which is sustainable and that will play an important role in ensuring energy security of the country. Moreover, the price of renewable energy is now much lower, which is also decreasing day by day,’ he added.
The energy expert also said that ‘we need to focus on energy conservation at this moment. It is possible to save 20-25 percent of fuel by preventing wastage of fuel properly. It also needs to implement a rationing system for supply of fuel. If we can do this, there will be no big problem right now.’
Energy Expert, Professor M Tamim said ‘the current situation would pose a serious risk to Bangladesh. We have seen in the past that such a catastrophe would halt development activities in developing energy-importing countries.’
Western countries, including the United States, are considering imposing sanctions on Russian oil, which could pose a greater risk to Bangladesh - what are the chances?
In response to this question, Tamim said "There is no doubt that this will create a bigger risk. The world economy will be ruined as a result, Bangladesh will be, because Bangladesh imports 40 percent of its energy."
Tamim said Bangladesh does not buy any oil directly from Russia, but overall the impact of sanctions on Russia on the market will affect Bangladesh as well.
Experts say that if the price of fuel oil continues to rise, the biggest impact will be on power generation in Bangladesh. Currently, 65-70 per cent of the electricity generated in Bangladesh is through gas, more than 30 per cent is through oil. Out of this, Bangladesh is importing about 25 percent of gas and the whole of oil is dependent on imports.
As a result, the crisis will hit power generation hard. Already the budget allocations for the three big projects have been cut, and there may be further cuts in the future.