Oil crisis: Lessons from global crises and Bangladesh’s blueprint for energy security
The latest global oil shortage has exposed Bangladesh’s fragile energy security and economic resilience. The crisis is not just external, but a reflection of long-standing structural weaknesses now laid bare
The queues at petrol pumps, the quiet anxiety in kitchen markets, and the rising cost of simply getting through the day are no longer inconveniences.
The ongoing 2026 US-Iran war and the blockade of the Strait of Hormuz have kicked off one of the most severe energy crises in modern history. Roughly 20% of the world's oil and LNG shipments have been disrupted, and nearly 30% of Asia's gasoline and naphtha imports are reliant on this route.
The fallout has been swift and unforgiving for Bangladesh.
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The country's economy is deeply dependent on imported energy; this is not merely an external shock. It is an exposure of long-standing vulnerabilities.
Global energy experts are unequivocal about the scale of the disruption.
Fatih Birol, executive director at the International Energy Agency, has described the situation as "the greatest global energy security challenge in history" in the agency's latest report on Responding to the Largest Supply Disruption in History.
Russell Hardy, CEO of Vitol, shared his estimates in the same report that between 600 million and 700 million barrels of oil have already been lost to the market, with projections reaching as high as one billion barrels.
As Brent crude crosses $120 a barrel and global jet fuel prices spike by 100%, the cost of transporting everything has surged dramatically. While energy directly accounts for about 7% of the Consumer Price Index, its indirect effects are cascading across entire economies.
For Bangladesh, the timing could not be worse.
The Asian Development Bank's April 2026 outlook forecasts GDP growth slowing to around 4%, while inflation hovers near 9%. Inflation touched a 10-month high of 9.13% earlier this year, driven largely by food and transport costs.
This crisis, however, is not unique to Bangladesh. Almost every nation relies on Middle Eastern energy to some degree and our neighbours are grappling with similar challenges. Yet, compared to most of our neighbours, let alone the developed world, Bangladesh's economic resilience and energy security remain fragile. This underlying weakness makes the current shock far more severe for us.
UNDP warns that developing economies are now caught in a dangerous bind: subsidise fuel to prevent unrest and risk draining reserves, or pass on costs and trigger widespread hardship.
Meanwhile, the Food Policy Institute warns that disruptions in fuel and fertiliser markets are pushing global food prices upward, hitting import-dependent countries the hardest.
Before the crisis, markets expected major central banks like the US Federal Reserve to cut interest rates in 2026. Now, that probability has collapsed from over 90% to just 22%.
High energy prices are keeping inflation up, forcing central banks to maintain tight monetary policies. The European Central Bank has warned of stagflation, a toxic combination of stagnant growth and rising prices.
For Bangladesh, this means borrowing costs will remain high precisely when external financing is most needed.
History offers views of both sides of the coin.
In the 1970s, the US and Europe faced similar turmoil during the OPEC oil embargo and the Iranian Revolution. Fuel shortages, long queues, and stagflation defined the era. Recovery came through decisive measures: aggressive interest rate hikes under Paul Volcker to tame inflation, alongside structural shifts, strategic petroleum reserves, investment in nuclear and alternative energy, and fuel efficiency mandates.
Brazil's hyperinflation crisis in the late 20th century offers another lesson. With inflation exceeding 2,000%, stability seemed unattainable. Yet the 1994 Plano Real, introducing a new currency tied to the US dollar and enforcing fiscal discipline, restored confidence and stabilised prices.
More recently, Sri Lanka's 2022 economic collapse showed both the dangers of mismanagement and the possibilities of recovery. Faced with acute shortages and political upheaval, the country turned to IMF support, tax reforms, subsidy cuts, and debt restructuring. The process remains painful, but it halted a downward spiral.
But not all countries have succeeded. Venezuela, despite vast oil reserves, spiralled into collapse due to corruption, over-reliance on oil, and unchecked money printing. Hyperinflation reached sky-high levels, and recovery remains elusive.
Lebanon's financial system, weakened by decades of mismanagement, collapsed under its own weight, with the currency losing over 90% of its value. Zimbabwe's hyperinflation crisis in 2008, where a loaf of bread cost billions, still echoes today through persistent instability.
These contrasting experiences show a hard truth: crises do not destroy economies alone; policy responses do.
In Bangladesh, the warning signs are already clear.
Policy Exchange Bangladesh describes the current moment as a "triple challenge," securing energy imports, maintaining export competitiveness, and sustaining remittance flows.
The LNG crisis is acute; Bangladesh imports millions of tonnes from Qatar, and prices have surged from $10–$12 per MMBtu to as high as $21–$28. At the same time, rerouted shipping via the Cape of Good Hope has increased freight costs for the readymade garment sector by around 30%, threatening its competitiveness.
Inflation, meanwhile, is eroding purchasing power. Despite regional peers like Sri Lanka and Pakistan managing to reduce inflation after their crises, Bangladesh remains trapped in a persistent high-inflation cycle.
The fiscal dilemma is very clear. Maintaining fuel subsidies risks draining foreign reserves, currently around $35 billion, while passing costs to consumers risks triggering further inflation.
Rushad Faridi, assistant professor at the Department of Economics, University of Dhaka, told TBS, "Tackling the energy crisis requires more than mobile courts and police. It was entirely predictable that the onset of the Iran-Israel conflict would send shockwaves through the global energy market.
"With supply chains disrupted, particularly through the Strait of Hormuz, global crude oil prices have nearly doubled. Bangladesh imports roughly 95% of its fuel, almost all of it from the Middle East. Consequently, for an import-dependent economy like ours, this regional war has rapidly escalated into a national crisis."
He added, "This crisis, however, is not unique to Bangladesh. Almost every nation relies on Middle Eastern energy to some degree and our neighbours are grappling with similar challenges. Yet, compared to most of our neighbours, let alone the developed world, Bangladesh's economic resilience and energy security remain fragile. This underlying weakness makes the current shock far more severe for us.
This is why India's approach of sector-specific price adjustments is instructive, Faridi noted.
"Rather than placing the burden directly on low-income earners, the Indian government selectively raised prices on premium fuels and bulk industrial supplies. State-owned oil companies increased premium fuel prices by Rs 2 to Rs 3 per litre, while keeping standard petrol and diesel prices stable for everyday consumers. Essentially, those who can afford luxury vehicles bear the cost, protecting public transit and agriculture. Meanwhile, 'bulk diesel' sold to large industries and commercial enterprises saw a price hike of roughly 25%," he said.
While Bangladesh has floated similar ideas, the government's primary strategy still relies on unsustainable subsidies and heavy-handed administrative crackdowns. Meanwhile, to combat hoarding and artificial shortages, the government has deployed the police and mobile courts. Nearly 300 mobile courts are currently scouring the country, handing out fines and jail sentences for fuel hoarding.
"Bangladesh's current policy of adjusting fuel prices just once a month is ill-suited for the present volatility. While a monthly review works in stable times, in a crisis where global prices fluctuate daily, it creates a massive incentive for speculative hoarding. Vendors naturally restrict sales at the end of the month, waiting for the anticipated price hike to maximise profits. To counter this, the government should transition to adjusting prices weekly-or even every few days-for specific fuels, as outlined earlier," Faridi further explained.
"To make matters worse, our domestic energy landscape has only deteriorated. The supply of natural gas from local fields has plummeted due to a glaring lack of state investment in exploration and extraction. To plug this growing deficit, the country began importing expensive liquefied natural gas (LNG) from the Middle East in 2018, alongside an increasing reliance on imported coal," he said.
The Asian Development Bank's April 2026 outlook forecasts GDP growth slowing to around 4%, while inflation hovers near 9%. Inflation touched a 10-month high of 9.13% earlier this year, driven largely by food and transport costs.
Crises of this magnitude cannot be managed through denial, delay, or coercion. They demand structural reform, strategic clarity, and political courage.
Bangladesh can continue to firefight, absorbing shocks through subsidies and short-term fixes, or it can confront its structural weaknesses head-on. The difference between those paths is the difference between countries that recover and those that remain trapped.
