How Bangladesh trails regional peers in managing the oil shock

When the Strait of Hormuz – a corridor that carries nearly a fifth of global oil supply – became embroiled in the US-Israel war against Iran, the shockwaves were felt across the globe, and hiking fuel prices became inevitable for most countries.

Around 20 oil-exporting nations control 80% of the global petroleum trade. Any disruption in those countries or in supply routes sends prices soaring in the rest of the world and forces governments to choose between fiscal pain and public hardship.

According to AFP tracking of 150 countries, fuel price adjustments in many economies – big or small – ranged from below 5% to over 55%. South Asia, heavily dependent on Gulf crude channelled through Hormuz, felt the squeeze sharply. Yet the divergence in crisis management across the region has been striking – and revealing.

Pakistan and Sri Lanka moved quickly to acknowledge the crisis and took measures to check consumption, ease fiscal strain and keep impacts lower on people and the economy.

Pakistan raised fuel prices by up to 55% in phases. But the hikes were accompanied by relief: petroleum levies were slashed, diesel levies cut to zero, federal ministers forfeited salaries, and targeted subsidies were rolled out for farmers, bikers and transport operators.

Besides, free bus services were introduced in major cities. In Punjab and Sindh, registered transporters and motorcyclists received direct support on condition that they did not pass on the full burden to commuters.

Sri Lanka, still recovering from its 2022 economic collapse, raised fuel prices by 34% and paired the move with strict demand management.

The Ceylon Petroleum Corporation enforced QR-based rationing, an odd-even number plate system, and consumption ceilings, hoping to cut demand by 20%. The island nation also shifted to a four-day workweek and expanded work-from-home policies to prepare for prolonged disruption.

India, with its strong refining capacity and discounted Russian crude supplies, took a different route.

It maintained steady domestic pump prices for mass-consumed fuels by cutting excise duties, slightly adjusted only premium grades, preserved its strategic reserves, and continued fuel exports to neighbours, including Nepal, Bhutan, Sri Lanka and Bangladesh.

Supply stability, rather than price shock, was India's primary shield.

Bangladesh lags behind

Bangladesh, by contrast, hesitated.

From the outset, officials maintained that fuel stocks were adequate and attributed shortages to panic buying and hoarding. Price hikes came much later than others.

Average 16% hikes, announced on 18 April, were quickly followed by a 10-20% increase in supplies. LPG prices were adjusted twice in a month.

But these moves were reactive, not supported by safeguard measures to cushion ripple impacts on public life. Immediate knock-on impacts were a disproportionate rise in transport fares, quickly translated into commodity prices.

Attempts at rationing were inconsistent, and supply monitoring through deploying "tag officers" did not work well. While Sri Lanka formalised and digitised its system, Bangladesh introduced informal ceilings at pumps but withdrew visible rationing ahead of Eid to ease public anxiety.

The absence of a consistent framework weakened demand management just when it was most needed. The core problem is not merely price adjustment. Crucial safeguard measures were also absent.

There were no targeted subsidies for farmers for irrigation, or for transport operators to force them not to raise fares. As a result, transport fares rose disproportionately, pushing up commodity prices.

Despite authorities' claim of adequate stock and BPC's reported increase in fuel supplies to state-owned companies, long queues of motorists and long-haul trucks persisted as pumps shortened operating hours or displayed "no fuel" signs.

Regional peers combined three elements: acknowledging the crisis, focusing on demand management and undertaking cushioning measures while hiking fuel prices.

Bangladesh largely focused on supply management and took belated and uneven steps to curb demand through inconsistent rationing and engaging "tag officer" with little or no visible impact.

But relief measures to help motorists, farmers, transporters and consumers cushion the price hike shocks remain almost absent. Despite the authorities' repeated announcement about adequate stocks, public perception of scarcity persists, prompting pumps to self-ration and motorists to struggle to keep tanks filled.

As a result, queues at pumps lengthen, and hoarding continues despite raids by authorities and seizure of illegally stored fuels in basements or on rooftops.

In a region equally exposed to Gulf supply routes, Bangladesh's lag is not due to geography or dependency. It stems from delayed acknowledgement, ad hoc demand management, lack of proper communication and the absence of safeguards against price shocks.

The Strait of Hormuz crisis has shown that managing fuel shortages is not simply about raising prices and building stocks. It is about managing demand and supply, maintaining public trust and protecting vulnerable groups – farmers, commuters, bikers and transporters.

On all those counts, Bangladesh still trails its peers.