Govt reverses decision to reduce fuel pricesl

The government has reversed its decision to reduce the price of fuel oil.

State Minister of Power, Energy and Mineral Resources Nasrul Hamid Bipu told the media on Wednesday the reversal decision was made because of recent trends in the global oil market.

“The price of fuel oil was to be reduced in two stages,” he said.

“We asked the government for permission to reduce prices, but the global price of oil started rising suddenly. According to the World Bank’s calculations, the price of oil may rise further. As a result we cannot bring down the price of oil now.”

Despite falling oil prices on the world market in the past two years, the Bangladesh Petroleum Corporation had kept prices unchanged in an effort to subsidise earlier losses.

From $105 per barrel in 2012, it dropped to as low as $33 in 2016.

In response to pressure from various sectors, the price of diesel and kerosene oil was reduced by 4 percent on Apr 24, 2016.

The price of octane and petrol was reduced by 10 percent. A few days before that, the price of furnace oil was revised downward from Tk 60 a litre to Tk 42.

Consumers demanded a further price reduction after the drop in price failed to bring down transport cost.

On Dec 28 Finance Minister Abu Mal Abdul Muhith said a decision had been taken by the government to reduce the price of oil in January.

At that time the finance minister had proposed to finalise the adjustment, basing the global oil price at $80 per barrel.

"But while oil prices fell to $40 and below at one point, they are rising once again. I believe they will end up around $60, so it is not too big,” Muhith had said.

Oil prices began to rise after the Organization of Petroleum Exporting Countries (OPEC) and other oil producers agreed to a joint production cut for the first time since 2011. The price is currently hovering around $55.60 dollars a barrel.

Though this price was consistent with Muhith's predictions, the prime minister believed it was not safe to reduce the price of oil at this time, said the state minister for power and energy Nasrul Hamid.

Asked how much the Bangladesh Petroleum Organisation earns through the sale of diesel and furnace oil, Nasrul Hamid said “The margin on diesel sale is very small. The government subsidises this fuel for farmers... it seems this subsidy will have to be extended for a few more years. Unless our poverty level decreases, we will have to maintain the subsidy.”

“Our main import is jet fuel. There is some margin on jet fuel when compared with diesel."

Asked about high government margins despite subsidies, Hamid said:  “I have the same question. If we provide subsidies, why do they need to be paid back? I think this question still lingers.”