Bangladesh mulls ways to raise diesel prices amid global volatility

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State Minister for Power, Energy and Mineral Resources Nasrul Hamid has hinted at a spike in the price of diesel in Bangladesh in the face of a volatile international market for crude oil.

Recent media reports indicate that the Bangladesh Petroleum Corporation, the state-run import and distribution agency, has called on the ministry to increase the price of fuel oil, especially diesel, citing mounting losses on imports due to the spiralling crude oil prices.

Addressing the matter on Thursday, Hamid said, "It's not a matter of increasing the price -- it has to be adjusted. We are incurring huge losses. Oil prices have risen around the world have multiplied severalfold. It's a really bad situation."

There have long been reports of oil being smuggled across the border to India whenever a marked disparity in the prices of fuel oil emerges in the neighbouring countries.

Hamid reiterated the threat of smuggling and said, “India has raised the price twice. If there is a difference with us, there is a possibility of oil being smuggled across the border area.”

Highlighting the losses stemming from diesel, he said, “Diesel, in particular, is more harmful to us. Prices have risen sharply in the world market. ”

In Bangladesh, diesel alone accounts for more than 73 percent of domestic fuel consumption. It is used in various fields, including road and sea transport, agriculture and power generation.

At present, diesel is being sold at Tk 65 per litre in the retail market. However, the BPC started making losses after the price of crude oil exceeded $70 per barrel in the international market, according to its Director (Operations and Planning) Syed Mehdi Hasan.

Now that it has risen above $90 per barrel, the losses have also grown proportionately.

But Mehdi denied reports that BPC's plan to raise the price of diesel was underway. The issue of changing prices is the sole prerogative of the government, according to him.

"The BPC can't even make any recommendations on this. We have verbally informed the ministry about the losses following the rise in oil prices in the international market."

"The BPC is facing losses due to the rise in crude oil prices in the international market. This is causing a loss of Tk 200 million to Tk 220 million every day in terms of marketing diesel and furnace oil. If the price of oil goes up further, the losses will also grow. Now it is up to the government to decide how to minimise the losses.”

Bangladesh's demand for petrol is met from domestic supply, while octane is imported. Petrol and octane marketing has been profitable for a long time but now the situation is changing.

When the price of diesel was last fixed at Tk 65 per litre in 2016, the price of crude oil in the international market was around $40 to $50 per barrel.

Back then, BPC was able to break even from the distribution of diesel. It could even turn a profit when the price went down in the international market.

According to the BPC, the country must import 4 million tonnes of diesel every year along with 100,000 to 120,000 tonnes of octane to meet the local demand. Almost the same amount of petrol is produced by domestic sources.

Based on the current market price, the BPC is incurring a loss of Tk 13 to Tk 14 on each litre of diesel, said Mehdi.

"Now, the price of crude oil in the international market has risen to $94. With the BPC's premium, this price goes up to $96. As a result, the BPC has been consistently making losses in the last three months."

The same reasons have also been cited for the increase in the price of furnace oil from Tk 53 to Tk 59 this month.