Expert suggests a policy to keep fuel oil prices stable amid global volatility

M Tamim believes the economy is not ready for regular adjustments to fuel oil prices in line with the global market

An energy expert has suggested formulating a policy to keep fuel oil prices stable amid volatility in the global market, warning that the latest spike in prices may create problems for the economy

M Tamim, a former professor of petroleum and mineral resources at the Bangladesh University of Engineering and Technology, believes the economy is not ready for regular adjustments to fuel oil prices in line with the global market.

“We could have done this transition slowly. It will pose a problem if we do this very fast,” said Tamim, criticising the government for raising fuel oil prices by as much as around 52 percent, the highest jump in Bangladesh’s history.

“We’ll need a policy if we want to keep the prices and the economy stable. If we had a policy, we wouldn't be facing problems that we are now,” he said at a virtual discussion organised by Bangladesh Energy Society on Sunday.

For fuel oil, Bangladesh depends on imports. The government has been keeping domestic prices under control with subsidies. As prices shot up globally due to the Russia-Ukraine war, the government said it decided to raise domestic prices and ease the pressure created by subsidies for the sector.

State-owned Bangladesh Petroleum Corporation made a profit of Tk 470 billion in the seven years to 2020-21, mainly because of a fall in prices in the international market during the coronavirus pandemic.

The situation changed after the Russia-Ukraine war had begun. The government said the BPC had suffered losses of more than Tk 1 billion daily in May and June. In July, the daily loss fell slightly, but it was at Tk 740 million as import costs remained high.

If prices fall globally, the government will make a profit, and keep it to use during future shocks, Tamim said, explaining how the policy should be.

He, however, admitted that making such a policy will be challenging for the government in the current condition. “We don’t have any control over the transport sector or commodity prices. We must watch out how fluctuating fuel oil prices may affect these.”

A former energy aide to the chief advisor of the 2007-08 military-controlled caretaker government, Tamim also said the government is facing more pressure because it started subsidising gas and power along with fuel oil.

Saleque Sufi, another expert, favoured controlling gas supply to households and power plants to ensure smooth supply to industries.

He also recommended strengthening efforts to explore the country’s gas reserves. He is confident Bangladesh will get more gas if it uses a proper plan for exploration.

Tamim said the government can do it by strengthening the management of Bangladesh Petroleum Exploration and Production Company so that they can work with foreign companies.

Tawfiq-e-Elahi Chowdhury, the prime minister's energy adviser, however, does not believe Bangladesh has much gas left to extract. He thinks the assumption that Bangladesh is “floating on gas” only serves a geopolitical purpose.

He suggested turning the focus to renewables for the agriculture sector. Irrigation through solar power will save diesel and increase production, he said, also emphasising power sourced from nuclear plants.