Govt raises fuel prices by Tk2 despite global oil slump

The government has increased the prices of diesel, kerosene, petrol and octane by Tk2 per litre, even as global oil prices continue to fall.

The Energy and Mineral Resources Division issued a notification tonight (30 November), announcing the revised rates. 

Under the new pricing, effective from 1 December, diesel will retail at Tk104 per litre, kerosene at Tk116, octane at Tk124, and petrol at Tk120.

Previously, on 31 May, the energy and mineral resources division last announced fuel prices, fixing diesel at Tk102 a litre, kerosene at Tk114, octane at Tk122 and petrol at Tk118. The government then kept fuel prices unchanged for five consecutive months.

The price hike comes just ahead of the boro season, raising farmers' production costs.

Meanwhile, global prices of both refined and crude oil have been declining in recent weeks. Brent crude, one of the key international benchmarks, has fallen to $62 per barrel. The price of WTI crude has dropped to $58.33. These are advance prices for January and are the lowest in a month.

According to Oilprice.org, Brent crude hovered around $60 per barrel throughout November, with the highest level recorded on 11 November at $65.11.

At the beginning of the year, on 1 January, Brent crude was priced at $74.64 per barrel, reaching its highest level on 16 January at $81.29. This year, Brent's lowest price has been $61.70. Prices of other crude grades generally follow the movements of Brent and WTI.

Md Amin Ul Ahsan, chairman of Bangladesh Petroleum Corporation (BPC), told TBS that fuel prices are adjusted every month. Since prices had not changed after June, no gazette had been issued.

He said global prices of both refined and crude oil had been rising slightly for several months, with a sharper rise this month that BPC could not absorb. As a result, prices were increased. If global prices fall in the coming months, domestic prices will also be reduced.

According to BPC sources, fuel prices are set by calculating the average global market price from the 21st of one month to the 20th of the next. BPC earns up to 40 paisa per litre. The calculation is based on S&P Global Platts and Arabian oil price indicators.

Under the International Monetary Fund (IMF) conditions, Bangladesh now adjusts domestic fuel prices monthly in line with the global market. However, despite regular adjustments, fluctuations in global prices have had limited impact on the domestic market.

Industry insiders say the main reason is the increase in the dollar exchange rate. At the beginning of 2022, the dollar stood at Tk86; it has now risen to Tk122. As a result, global price reductions have not translated into lower domestic prices.

Fuel price increases have a direct impact on transport costs, industrial production and irrigation in agriculture. The indirect impact extends to all sectors. Higher fuel prices also contribute to rising inflation.