A slide in the global oil price is a boon for the economy, but time is still not ripe for downward adjustment of the price of diesel, petroleum or octane, the head of Bangladesh Petroleum Corporation (BPC) said Saturday.
Anwarul Karim said refined oil price is down by at least 30 dollars a barrel since the crude rate hit the highest on July 11, but the government was still losing Tk20 for every litre of diesel and kerosene it sells.
"In the international market, the price of diesel has come down to 130 dollars a barrel-- down from more than $170 nearly a month back," he said.
"We think the price slide will accelerate in the coming days due to strong dollar. But we will be still incurring losses in diesel and kerosene unless the price comes down to less than $100 a barrel," he said.
He said the domestic price of petroleum and octane is now at par with the international market. "But the government needs more time to watch the global market before it reconsiders the domestic price."
The BPC, the government's lone oil importing agency, bought about 3.8 million tonnes of oil last year from global market, with refined oil making up three quarters of the total.
The country mainly uses diesel in the farming and transportation while kerosene is predominantly used in cooking and lighting shops and rural houses who don't have any access to electricity.
Karim said the government has set aside over Tk 100 billion for subsidising oil in the domestic market in the current fiscal year ending in June 2009, but the amount may come down sharply if the global oil price continues to fall.
"We expect the fall to continue. It will obviously cut down the amount of subsidies the government has set aside for this fiscal," he said.
The country last year spent some Tk60 billion on oil-- the highest amount in the country's history-- as crude oil price nearly doubled to 147 dollars a barrel in since beginning of last fiscal in June, 2007.
The government bore much of the brunt of the price hike, by subsidising the import, but was forced to raise the rates between 34 and 37.5 percent just a day before the current fiscal year began.
The price hike immediately resulted in a massive spike in transportation tariffs, prices of food and commodities and industrial cost, causing widespread criticism from the civic groups and political parties.
With the oil prices easing in the international market, energy secretary Mohammad Mohsin said the government would no longer seek hard-term loan from top international banks to finance its oil import bill.
"In the future, the government will finance most of oil import bill. The rest will be financed through loans from the IDB (Islamic Development Bank)," Mohsin told the FE.
The government borrows some one billion dollars on easy terms from the IDB each year to foot its oil bill, but massive hike in oil prices in the recent years forced it take some $500 million hard-term loan from Standard Chartered Bank to finance the import.
Bangladesh has already approached the IDB to raise the borrowing limit, with a decision from the Jeddah-based development lender expected within months.
