Geopolitical tensions and war in the Middle East, and the closure of the Strait of Hormuz, are disrupting the global oil supplies, posing a major risk to Bangladesh’s energy security and economy. Delays in imported oil shipments have already led to the closure of Eastern Refineries in the country while the fuel and transportation costs have increased, which means that the GDP growth to be declined by 1-1.5%.
The oil prices rise in the global market caused import pressure on Bangladesh, which is having an adverse effect on the country’s inflation and the economy. As domestic oil production is limited, about 60-70 percent of the total energy demand of the country is import-dependent, especially diesel and octane, the widespread use of diesel-based machinery and vehicles in various sectors is putting pressure on the economy’s supply chain. The oil market crisis reflects long queues, ‘Sold Out’ notices at many pumps, and lack of diesel stock have caused concern, despite the government’s repeated announcements of ‘stock availability’ and ‘supply not being cut off’.
It is obvious the situation is getting more prolonged, and its impact will not be limited to regional security. There may be major instability in the global energy market – shipping routes, insurance costs, currency markets and trade flows. There is a risk of immediate pressure on energy prices, foreign exchange reserves, inflation and remittances in these four sectors.
Analysts have warned that if the Strait of Hormuz is closed for a long time, there may be major instability in the global energy market. Oil prices have already started rising in the international market, with Brent crude hitting $73 per barrel. According to the forecast of investment firm Goldman Sachs, the price of oil may exceed $100 if the blockade in the strait lasts long. India’s Equirus Securities said that if there is a major disruption in supply, crude oil prices could rise to between $95 and $110.
All in all, the tension over the Strait of Hormuz has created new major risks for the global energy market and the global and national economy. Analysts fear that if its impact on energy-importing countries continues, it will have a multi-dimensional impact on the Bangladesh economy.
Whatever the apocryphal scenario, we believe that it is possible to cope with potential shocks through advanced preparation, policy coordination, financial discipline and strategic diplomacy. In a volatile global context, Bangladesh’s biggest challenge now is to maintain economic stability. According to economists, urgent steps to deal with potential shocks include alternative sources of energy imports and long-term contracts, stabilising LNG supplies, increasing investment in renewable energy, increasing remittance incentives, increasing food and energy reserves, diversifying export markets, and strategic vigilance in reserve management.
Bangladesh traditionally follows the policy of ‘friendship with all, hostility with none’. Bangladesh has important relations with the United States, Saudi Arabia, and Iran. If the current crisis is prolonged, careful diplomatic balancing will be necessary to maintain the expatriate labour market and energy supply.
The writer is a journalist and columnist
