Kazi Zahidul Hasan :
Volatility in petroleum prices in the international market in the wake of Iraq unrest is likely to put additional pressure on the government for import financing in the next fiscal, officials and experts said on Monday.
Concerned over the developments in Iraq, they said, Bangladesh is relaying on a high fossil fuel share in its energy mix for both power generation and industrial production. So, fluctuations in global oil prices could have further significant knock-on effects on the economy, affecting trade balance, inflation and public accounts, they added.
“The price volatility led by tightening supply would create further burden for the government at a time when it is trying to contain fiscal deficit by cutting subsidy bills on oils,” a senior energy ministry official told The New Nation yesterday.
He said, the government has to spend additional fund for the import of petroleum products due to their higher market prices following Iraq unrest.
“Crude oil prices have moved up by $2.0 in the last two weeks and it is nothing in historical terms. But a lot would have to happen once the Iraq crisis deepens further. A prolonged crisis would be led to serious disruption to its oil exports and later that would have significant impact on prices,” he added.
“We are concerned over the matter as the rising prices of oils could create further financial burden for us,” said Md Eunusur Rahman, Chairman the Bangladesh Petroleum Corporation (BPC).
He said, the violence in Iraq has a direct impact on global crude prices because the country is the second-biggest oil exporter in the 12-nation Organization of Petroleum Exporting Countries (OPEC) after Saudi Arabia.
When asked, he said, it is still in early stages and prices will go up depends on the length of conflict. But, no doubt an escalation in Iraq unrest could create supply shock of petroleum
products in the global market pushing up their prices further.
“Prices of petroleum products are keep on rising in the global market following the fresh Iraq unrest. This will cause the government to spend additional fund for fuel import,” Prof Shamsul Islam, a noted energy expert of the country, told The New Nation yesterday.
He said: Once the import cost of fuel go up it would not only help widening the government’s fiscal deficit but also force it to spend additional fund for meet up subsidy bills.
Later, the government may go for upward adjustment of fuel prices in local market to limit the subsidy bills. Such a move could also leave negative impact on economy by fueling inflation and affecting livelihood of the common man, he opined.
Prof Shamsul Alam urged the government’s policy makers to formulate a long-term policy instrument to reduce the country’s vulnerability in the wake of oil price volatility.
The government can also create an ‘energy fund’ to tackle the crisis, he added.
“Definitely there will be some impact of the oil price hike on Bangladesh economy. But I feel it will be limited this time,” said Dr AB Mirza Azizul Islam, a former finance adviser of the caretaker government.
Recalling the country’s previous experience on the issue, “We had dealt with the ever-rising fuel price hike in 2007-08 when fuel price hit to $140 to $150 per barrel”.
The import of petroleum products by the BPC will reach 5.67 million tonnes by the end of the fiscal year of 2013-14. The state-owned company will have to pay about $5.45 billion import bill for the purpose.
Officials said, fuel import in the next fiscal year would go up by 9 to 10 per cent requiring more funds. And if the rising trend of oil prices continues, BPC may face serious crisis for arranging the funds.
Volatility in petroleum prices in the international market in the wake of Iraq unrest is likely to put additional pressure on the government for import financing in the next fiscal, officials and experts said on Monday.
Concerned over the developments in Iraq, they said, Bangladesh is relaying on a high fossil fuel share in its energy mix for both power generation and industrial production. So, fluctuations in global oil prices could have further significant knock-on effects on the economy, affecting trade balance, inflation and public accounts, they added.
“The price volatility led by tightening supply would create further burden for the government at a time when it is trying to contain fiscal deficit by cutting subsidy bills on oils,” a senior energy ministry official told The New Nation yesterday.
He said, the government has to spend additional fund for the import of petroleum products due to their higher market prices following Iraq unrest.
“Crude oil prices have moved up by $2.0 in the last two weeks and it is nothing in historical terms. But a lot would have to happen once the Iraq crisis deepens further. A prolonged crisis would be led to serious disruption to its oil exports and later that would have significant impact on prices,” he added.
“We are concerned over the matter as the rising prices of oils could create further financial burden for us,” said Md Eunusur Rahman, Chairman the Bangladesh Petroleum Corporation (BPC).
He said, the violence in Iraq has a direct impact on global crude prices because the country is the second-biggest oil exporter in the 12-nation Organization of Petroleum Exporting Countries (OPEC) after Saudi Arabia.
When asked, he said, it is still in early stages and prices will go up depends on the length of conflict. But, no doubt an escalation in Iraq unrest could create supply shock of petroleum
products in the global market pushing up their prices further.
“Prices of petroleum products are keep on rising in the global market following the fresh Iraq unrest. This will cause the government to spend additional fund for fuel import,” Prof Shamsul Islam, a noted energy expert of the country, told The New Nation yesterday.
He said: Once the import cost of fuel go up it would not only help widening the government’s fiscal deficit but also force it to spend additional fund for meet up subsidy bills.
Later, the government may go for upward adjustment of fuel prices in local market to limit the subsidy bills. Such a move could also leave negative impact on economy by fueling inflation and affecting livelihood of the common man, he opined.
Prof Shamsul Alam urged the government’s policy makers to formulate a long-term policy instrument to reduce the country’s vulnerability in the wake of oil price volatility.
The government can also create an ‘energy fund’ to tackle the crisis, he added.
“Definitely there will be some impact of the oil price hike on Bangladesh economy. But I feel it will be limited this time,” said Dr AB Mirza Azizul Islam, a former finance adviser of the caretaker government.
Recalling the country’s previous experience on the issue, “We had dealt with the ever-rising fuel price hike in 2007-08 when fuel price hit to $140 to $150 per barrel”.
The import of petroleum products by the BPC will reach 5.67 million tonnes by the end of the fiscal year of 2013-14. The state-owned company will have to pay about $5.45 billion import bill for the purpose.
Officials said, fuel import in the next fiscal year would go up by 9 to 10 per cent requiring more funds. And if the rising trend of oil prices continues, BPC may face serious crisis for arranging the funds.
