Oil prices fell in Asian trade on August 10, 2015 extending weeks of losses after a US report stoked expectations of a global glut of supplies, reports AFP. Brent crude for September was trading at $48.25 a barrel after ending at $48.61 a barrel on Friday August 07, 2015. "It's still a supply story. There is not a lot of upside for oil." Concerns about a global supply glut were stoked on Friday when the number of US drilling rigs rose for the third straight week.
A glut in crude oil supply is seen as the main driver for a sharp decline in oil prices that has seen crude slump to almost a third of its mid-2014 peaks. News of rising US production comes as the top producing cartel, the Organisation of the Petroleum Exporting Countries (OPEC) has refused to cut output and as investors wait for Iran to ramp up exports after a major deal over its nuclear programme last month. In exchange for curbing its nuclear activities, Tehran will see the lifting of sanctions, which have slashed its oil exports. Investors predict crude prices will remain under pressure for the rest of the year 2015, particularly after trade and inflation data added to concerns about China's economy over the weekend. Experts are expecting oil prices not to recover at all in the second half of 2015.
Against this backdrop it is disappointing to know that the Bangladesh energy ministry is thinking of raising the oil and gas prices soon while the oil price is the lowest in the international market. All countries around the world, including countries in South Asia, are adjusting the price keeping pace with the price of oil in the global market. While the downward adjustment of oil price is the sensible decision in all countries, Bangladesh has been maintaining the price abnormally high ever since the fall in oil price.
Bangladesh economy received a big jolt when the oil price was raised almost by 70 to 80 per cent. The price of all utilities, including the prices of daily necessities, went up causing sufferings to the consumers. The most affected sector was transportation. The cost of movement of commuters and goods went high. The cost of electricity also went up, raising the cost of businesses. The cost of investment went up and investors felt discouraged to put in their money.
When the oil price started falling in the international market, hopes were raised that the cost of utilities and daily necessities would come down to the solace of common people and that will also boost investment. The government should adjust oil price downward so that the economy can gain momentum, leading to accelerated growth. The present trend indicates that the oil price will further come down and many nations are making gains by adjusting their domestic prices. But Bangladesh is doing the reverse and enhancing the prices of oil that has been raising the cost of investment and increasing the prices of daily necessities which are transported to the urban markets from the rural areas. The artificial high price of oil also adversely affects agriculture resulting in the high cost of production. Â
The main cause of decelerated investment in the private sector is mainly due to high price of oil and related utilities. In this context, the government should review its decision and lower the price of oil. It is an internationally accepted fact that the nations that are aspiring to achieve 7.0 to 8.0 per cent growth must boost investment especially in the private sector. But if the cost of investment remains artificially high, the higher growth will never be achieved. The political cost of raising the oil price in our country against global trend may be very high. The normal practice in market economy is that the price is adjusted with the rise and fall of oil price in the international market. This is ethically correct and politically wise. The government should adhere to market rule and ethical standard so far as oil price is concerned.
The writer is a retired Professor of Economics, BCS General Education Cadre.
sarwarmdskhaled@gmail.com
Oil price hike bid disappointing
Sarwar Md. Saifullah Khaled | Published: August 14, 2015 00:00:00 | Updated: November 30, 2024 06:01:00
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