Worries over impact of fresh hikes in petroleum prices

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Nizam Ahmed The authorities concerned are getting worried over the impact of a fresh hike of petroleum prices in the global market. Such prices have started rising again, particularly triggered by a new economic sanction by many western countries on Iran over its nuclear programme, officials said on Wednesday. Brent crude price was above $109 a barrel ($817.5 per tonne) in Singapore on Wednesday (yesterday) two days after the United States, Britain and Canada announced new sanctions on Iran's energy and financial sectors, ratcheting up pressure on Tehran to stop its nuclear programme. Last Tuesday Brent crude rose above $107 a barrel ($802.5 per tonne) following the sanction on Iran on Monday. Brent is the global benchmark for crude oil from the Altantic basin, US Gulf Coast, West Africa, North Europe and North Sea. The prices of other benchmarks including ICE (International Exchange), IPE (international Petroleum Exchange), and WTI (West Texas Intermediate) are also on the rise, business data in the internet said. If the petroleum prices continue to rise Bangladesh which solely depends on imported petroleum products and crude oil, will have no other option but to raise the fuel prices once again, competent sources said. In the wake of a falling trend of oil in international market in the past several months, the authorities concerned, after the latest petroleum price-hike, thought about lowering the prices in the domestic market in the coming months. "But the fresh upward trend has frustrated the authorities much as it may not make it possible for them to lower the prices in the coming months," an official of the Bangladesh Petroleum Corporation (BPC) told the FE. The state-owned BPC is the sole importer and distributor of crude and petroleum products in the country. BPC will require to import around 6.50 million tonnes of refined petroleum products at an aggregate cost of around Taka 460 billion (US$ 6.21 billion) in fiscal year (FY) 2011-12, up by 53 per cent from the previous fiscal's Taka 300 billion, to meet the growing needs, specially to supply fuel to newly set up 34 power plants. More power plants are planned to be set up to meet the electricity shortage of some 2,000 mw against the requirement for some 7,000 mw, the ministry of power, energy and mineral resources said. To cut the subsidy bill, the authorities are often compelled to raise the prices of petroleum products, mainly the widely-used diesel, kerosene, octane, petrol and furnace oil. The government raised prices of the petroleum products, lately again, on November 10, for the third time since May last. Petrol, octane, diesel, kerosene and fuel oil were raised by Taka 5.0 per litre on November 10 and the price of petrol has been fixed at Taka 86 a litre, octane at 89 taka, diesel and kerosene at Taka 56 and furnace oil at Taka 55. "The latest price hike will help reduce the subsidy given already in the past months. The prices would, however, be lowered again if the prices continue to drop in international market in the coming months," Tawiq-e-Elahi Chowdhury, adviser to the prime minister on energy affairs told reporters after the administered petroleum prices were raised last time. Investors fear oil prices could spike further in the event of any air strike on Iran's nuclear sites, which could suddenly cut supply from OPEC's second largest crude producer and disrupt trade in the Strait of Hormuz, the world's most important oil transit channel, the agencies said. The US sanctions have already made it extremely difficult for many global oil companies and traders to obtain bank financing to trade Iranian crude, less than a third of which goes to Europe, with the rest flowing to China and India. France has urged the European Union (EU) and other nations to immediately freeze the assets of the central bank of Iran and to suspend purchases of Iranian oil, steps it described as "sanctions on an unprecedented scale". Political observers fear that the escalation of the row is likely to create further pressure on the market as it is likely to reduce production in the Gulf and the Middle Eastern countries. Separately, Saudi Aramco CEO Khalid al-Falih said in Moscow last week that he did not expect oil demand to fall in the future and that he had seen oil prices remaining at a "healthy" level in the long term. "Healthy' is a jargon for prices when they stay at certain height, said a market specialist. Speaking to reporters on the sidelines of an energy forum in Moscow, Falih said he did not see a drop in crude oil demand as it was driven upward by an economic growth in Asia, according to reports by news agencies. "I expect [oil] prices will remain healthy in the long term driven by demographics which is rising and by economic growth in Asia," a leading agency was reported to have quoted Falih as saying.