The other side of the boom

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Mahmudur Rahman
If there was a coincidence between the revelations of the government's huge budget focusing on the power and energy sector and the news that the price of oil on the international market creeping up it was a bizarre one.
After almost three years of relative comfort in the balance of the government's petroleum bill currently slated to be in the black, it may well be time for some future thoughts of what will happen once the western economies really shape up.
The very news that US jobless rates have begun to fall and new recruitment is taking place sent the price of oil up by 1.0%, and we are talking relatively small numbers of jobs. Western governments are bending backwards in trying to have new jobs generated thereby propelling domestic consumption. One of the key indicators will no doubt be the number of new car sales and the subsequent demand for petroleum products. In turn this will send the price of crude upwards thereby becoming a bane for developing nations that depend on imports of crude. And while such an upturn signals well for exports, especially garments-there is no doubt that the days of value driven exports are gone whereas that of imports, especially grain has come to stay for quite a while.
The government has been able to fund the huge subsidies to farmers partly because of the savings achieved from petroleum subsidies. Where the next lump sum for such subsidy will come from is a question that must be asked. The budget formulation process is based on certain assumptions and one only hopes that the prospect of a rise in such commodity price rise will have been factored in. Currencies may have remained weak as investors focused on commodities in the past two years or so but with increasing signs of these dropping even as the major currencies gather strength should be indicative of the future trend.
Just as the ever intriguing question of how to tackle a bumper production in terms of prices, especially the inverse impact on farmers and consumers requires a careful balance, fuel prices and the inverse impact on profitability will also require careful scrutiny. The last time oil prices went through the roof there was a scurry for CNG conversion of vehicles. This time around with natural gas supply in a sorry situation-there doesn't seem to be a suitable alternative.
While consumers have had to accept rate hikes for electricity-and in all probability will have to for gas, a further hike in oil prices even in the not too distant future may be too much to take on. The rising cost of transportation may not be accepted as quietly by the masses as it will eat further into the recent gains of salary increases. Perhaps now the need for some suave diplomacy in getting into motion some friendly bilateral trade treaties that provides a buffer against such a shock.
(The writer is a former Head of Corporate & Regulatory Affairs of British American Tobacco Bangladesh, former Chief Executive Officer (CEO) of Bangladesh Cricket Board and specialises in corporate affairs, communications and corporate social responsibility. e-mail: mahmudrahman@gmail.com)