Soaring energy costs and options for the economy
Amirul Islam | Sunday, 13 July 2008
THE world might have to live with the higher cost of fuel oil for a longer time than anticipated, prompted by escalating demand for oil rather than lapses on the part of producers to pump out more oil. Even at $200 a barrel, its demand was unlikely to diminish, according to various expert forecasts. Understandably, the adverse impact of the soaring costs of imported energy is visible for Bangladesh as well as other economies. It had to spend more than an additional $1.0 billion on oil imports in the last fiscal year. And the way oil prices are soaring, the figure could double before long. No doubt the increased costs of energy is putting a great stress not only on its foreign exchange reserve or balance of payments position. Besides, oil sold at augmented prices is hurting the domestic users. It pushed up the costs of doing business. It is eroding competitiveness in many areas. The government had, of late, to raise again the domestic prices of oil. Energy security, no doubt, is serious issue for Bangladesh. It needs to be addressed expeditiously, efficiently and imaginatively.
But when the price of crude petroleum is rising, the country's lone crude refining plant, Eastern Refinery Limited (ERL) is limping, adding to the energy costs. Reportedly, the ERL currently produces 1.4 million tons of refined oil and other petroleum products against the annual demand of 3.7 million tons. As production remains static in the face of rising demand, the state owned Bangladesh Petroleum Corporation (BPC) has no option than to import refined oil and other products from the international markets at exorbitant prices. Clearly, the energy costs could be much lower if the ERL could refine more. According to various projections, the country's demand for refined oil and other petroleum products would reach 6.6 million tons by 2010. In order to meet this demand, the ERL needs to set up a second refining plant at the fastest. Besides, it needs to go for urgent balancing, modernisation, replacement and expansion (BMRE) of the existing plant.
But plans do not seem to be on the card to indicate progress towards these goals. The growing energy insecurity dictates the adoption of a plans and its implementation to these ends at the soonest. The government must mobilise funds on an emergency basis for the ERL's expansion and BMRE. It needs to have long-term contracts with suppliers of crude to get it at relatively stable prices, as far as possible. But to be able to and store the crude also, the ERL will have to increase and improved its capacities.
Meanwhile, every effort must be made to boost the use of coal and gas as alternative fuels and to substantially increase the use of non-conventional energy sources of bio gas, solar electricity, electricity from wind energy and wave energy. Experts say that Bangladesh is endowed with the potential to meet its energy requirements from the non-conventional sources. Even in neighbouring India, electricity generated from wind energy is supplied to the national grid to partially meet its energy requirements. Bangladesh needs to acquire and develop similar capacities, fairly soon, through serious and sustained steps.
Furthermore, in view of the soaring energy costs, the government needs to consider and implement a programme for energy conservation through consultations with different stakeholders. It must include taking of hard measures to reduce theft of energy, euphemistically called 'system loss '.
Meanwhile, the latest announcements by the Chief Adviser (CA) and the Special Assistant to the CA who is in-charge of the ministry of power and energy, about policy-supports for promoting the use of energy from renewable and non-conventional sources are welcome. But things should move faster. Efforts should, therefore, be activated to translate the announcements into actions. The sooner, the better.
But when the price of crude petroleum is rising, the country's lone crude refining plant, Eastern Refinery Limited (ERL) is limping, adding to the energy costs. Reportedly, the ERL currently produces 1.4 million tons of refined oil and other petroleum products against the annual demand of 3.7 million tons. As production remains static in the face of rising demand, the state owned Bangladesh Petroleum Corporation (BPC) has no option than to import refined oil and other products from the international markets at exorbitant prices. Clearly, the energy costs could be much lower if the ERL could refine more. According to various projections, the country's demand for refined oil and other petroleum products would reach 6.6 million tons by 2010. In order to meet this demand, the ERL needs to set up a second refining plant at the fastest. Besides, it needs to go for urgent balancing, modernisation, replacement and expansion (BMRE) of the existing plant.
But plans do not seem to be on the card to indicate progress towards these goals. The growing energy insecurity dictates the adoption of a plans and its implementation to these ends at the soonest. The government must mobilise funds on an emergency basis for the ERL's expansion and BMRE. It needs to have long-term contracts with suppliers of crude to get it at relatively stable prices, as far as possible. But to be able to and store the crude also, the ERL will have to increase and improved its capacities.
Meanwhile, every effort must be made to boost the use of coal and gas as alternative fuels and to substantially increase the use of non-conventional energy sources of bio gas, solar electricity, electricity from wind energy and wave energy. Experts say that Bangladesh is endowed with the potential to meet its energy requirements from the non-conventional sources. Even in neighbouring India, electricity generated from wind energy is supplied to the national grid to partially meet its energy requirements. Bangladesh needs to acquire and develop similar capacities, fairly soon, through serious and sustained steps.
Furthermore, in view of the soaring energy costs, the government needs to consider and implement a programme for energy conservation through consultations with different stakeholders. It must include taking of hard measures to reduce theft of energy, euphemistically called 'system loss '.
Meanwhile, the latest announcements by the Chief Adviser (CA) and the Special Assistant to the CA who is in-charge of the ministry of power and energy, about policy-supports for promoting the use of energy from renewable and non-conventional sources are welcome. But things should move faster. Efforts should, therefore, be activated to translate the announcements into actions. The sooner, the better.