BD fuel prices could be hit by Strait of Hormuz closure

The sudden closing of the Strait of Hormuz—a vital sea route for shipping—has caused new worries in the international energy market. This disruption could drive up global fuel prices, putting Bangladesh’s economy under pressure once again.

For now, Bangladesh’s fuel stocks are stable. According to the state-run Bangladesh Petroleum Corporation (BPC), the country has 414,000 tonnes of diesel in stock, which is enough to last for 34 days. There is also enough octane to last for about 40 days. BPC expects another 8 to 10 fuel ships to arrive by the end of this month, which will help keep supplies steady.

Global prices have changed wildly over the last few months. During the peak of recent conflicts in March and April, a single shipment of diesel cost Bangladesh around 45 million US dollars. Recently, that price dropped to 32 million US dollars. Similarly, crude oil prices had dropped to 76.10 US dollars per barrel on Friday, compared to over 114 US dollars during the height of the conflict. However, experts are watching the markets closely to see how much prices will jump following the sea route closure.

To secure future supplies, the government has nearly finalised a deal to buy 1.6 million tonnes of fuel under a government-to-government (G2G) system to cover the country until December. During a meeting in Singapore, which was attended by Energy Minister Iqbal Hassan Mahmud, a deal was struck with supplier companies to lower shipping costs.

An Indian company first agreed to drop its shipping fees, forcing other major suppliers like Unipec and PetroChina to match the lower rate. Officials say this negotiation will save Bangladesh around 7 billion taka compared to buying through an open market. The deal was approved by BPC and is now waiting for final cabinet clearance. The total cost is expected to be over 180 billion taka, depending on global market rates.

While oil supplies look safe for the next month, liquefied natural gas (LNG) is a bigger worry. Long-term suppliers have not delivered any gas since March, forcing the state gas company, Petrobangla, to buy gas from the volatile daily spot market.

AKM Mizanur Rahman, the Financial Director at Petrobangla, warned that if the Strait of Hormuz stays closed, both oil and gas prices will skyrocket. In March, Bangladesh had to pay a very high price of 28 US dollars per unit for gas. Thanks to a recent ceasefire, that price had happily dropped to between 16 and 17 US dollars last week, but the future is now uncertain.

At the same time, BPC is facing a severe money shortage at home. The government has not paid any fuel subsidies to BPC for the past four months. To keep importing fuel, BPC had to use 210 billion taka that was originally set aside for building projects, including a new refinery. BPC has repeatedly written to the Finance Division asking for this subsidy money, but they have not received a response yet.

Despite these heavy financial pressures, energy officials say they learned a lot from the supply shortages they faced last March. Fuel storage depots across the country have already been warned to stay alert, and officials believe these early preparations will help prevent major fuel shortages for regular citizens in the coming weeks.