Passing on benefits of oil price decline

The slump in petroleum price in the international market in recent months must have come as a great relief for the government, particularly the state-owned Bangladesh Petroleum Corporation (BPC). The oil prices have been on an unabated decline because of the prospects of a slow global economic growth in the months ahead. The Brent oil price reportedly has declined to $88 a barrel, a level witnessed in 2010 in the aftermath of the worst-ever financial meltdown in the world history. No doubt the declining oil prices would help the country save some foreign exchange and cut its subsidy costs on account of its oil marketing operations. So, the benefits of the decline in oil price in the international market are quite substantial. But there has unfortunately been no such move on the part of the government to pass the benefits, at least to a limited extent, on to the general consumers.
The government has time and again laid emphasis on the market-based price adjustment of fuel oil. The multilateral donors also have been insisting on the use of the same price fixation mechanism. Every time the government had hiked the fuel oils in the recent times, it had promised to bring down the same later in keeping with the international price levels of the commodity.  The BPC procured oil in June last at $115 a barrel and its latest procurement of the item was at $97 a barrel. If the decline in oil price persists for a year, Bangladesh, according to an estimate, would save $50-$60 million.
The government might be reluctant to lower domestic oil prices on the plea that it is still providing subsidy to fuel oils. This stance, however, would amount to breaching the promise it had made earlier to lower fuel prices in line with international market prices. Moreover, the conditions set by the International Monetary Fund (IMF) on fuel oil subsidy would not debar the government from passing the benefits of the declining oil prices onto the domestic consumers. The current procurement prices do leave scope for lowering domestic rates of fuel oils without affecting the IMF conditions. Besides, any downward readjustment of fuel oil prices would help the industries and exporters to cut their operational costs and help them become competitive in the international market.
For instance, a substantial volume of fuel oils are consumed by the industrial units to run their captive power generators. A cut in fuel price would help them lower their operational costs. The benefit of the cut in operational costs of producers of goods and services and public transports due to readjusted fuel oil prices, however, is unlikely to be transferred to the general people in most cases. That is how things work in Bangladesh. But any downward readjustment of fuel oil prices might at least save them from a temporary halt to further hike in commodity prices. This is also a critical factor for consideration before any final decision is made to an earlier-announced proposal to hike the energy prices including those of gas and electricity. Meanwhile, some countries including neighbouring India have lowered the domestic fuel oil prices to benefit the consumers. There is no logic for the government to deprive the country's consumers of the benefits in a similar way.