People are deprived of the benefit of a recurrent fall in the oil prices on the international market as domestic rates of the fuels are not readjusted in keeping with the cut-down import costs, observers said.
The country has to make lower import payments and, thus, spend less as subsidies on account of marketing the energy products for the price slide.
Brent, the international oil market, sank to US$88 a barrel--a level seen in December 2010. According to international media, fear about weakening global growth is the main reason behind the four-year low.
Energy ministry sources told the FE that they have no immediate plans for adjusting the domestic prices with the international market rates-unlike the situation in other countries.
Many economies, including the neighbouring India, have readjusted their fuel prices at retail level.
Now the gap between the domestic and the international market prices has narrowed down, resulting in lower marketing cost at home.
According to International Monetary Fund (IMF) conditionalities applied for Bangladesh, the difference should be Tk 10 per litre until June, according to the finance division.
After June, the gap has been much lower following the international market fall by 20 per cent since.
Mosleh Uddin, director (operations and planning) at Bangladesh Petroleum Corporation (BPC), told the FE that local buyers have been paying much as per the older international rates.
BPC, the country's lone oil procuring entity, used to purchase the petroleum fuels at a cost ranging between $105 and $107 a barrel few months back.
The petroleum corporation last opened letter of credit at $97 a barrel a few weeks back-much lower than the June rate of $115.
Mr Mosleh Uddin said he was not in a position to comment on the matter of higher retail rates as it is linked to government policies.
"This is not my cup of tea. I want to say that this sharp fall will help trim the import bills down," he said.
According to a rough estimate, if the fall sustained at least a year, Bangladesh will save at least $50-$60 million.
Bangladesh imports more than 5.0 million tonnes of fuel oils, including 1.3 million tonnes of crude for the country's lone refinery-Eastern Refinery Ltd--in Chittagong.
More than 400,000 tonnes of oils, including 100,000 crude, arrive in the port each month.
Bangladesh mainly procures gas oil or diesel followed by furnace oil to feed expensive power plants.
The International Energy Agency, the wealthy nations' energy watchdog, says global demand for oil is still weighed heavily by weak economic growth. And this, together with a supply glut, is pushing down prices. The price indices may fall further.
Eunusur Rahman, chairman of the BPC, told the FE that it be good for Bangladesh if it cashes in on the falling prices as the prices are too low.
But, he said, this is not possible at this moment as the BPC has cash crisis and limited storage capacity.
BPC's director (operations and planning) Mr Mosleh Uddin said Bangladesh cannot procure beyond its annual target.
International Islamic Trade Finance Corporation (ITFC), an autonomous entity of the Islamic Development Bank Group, funds both cash and deferred payments for procurement of fuel oils.
"Actually, we cannot raise the volume of fuel oils avoiding the ITFC to cash in on the falling prices," Mr Mosleh Uddin said.
He also said BPC has limited storage capacity that will shoot up to 1.0 million tonnes at the end of December 2014.
A senior official at the BPC's finance department said Bangladesh's subsidy cost will fall for the falling prices.
The government has earmarked for the current fiscal year a total of Tk 260.53 billion for subsidy.
Of the amount, Tk 24 billion will go to the BPC. And Bangladesh Power Development Board will get Tk 70 billion.
jasimharoon@yahoo.com
Oil price fall on world market cuts import cost
Jasim Uddin Haroon | Published: October 16, 2014 00:00:00 | Updated: October 15, 2014 23:37:53
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