Probable Hormuz channel closure: Bangladesh's fuel imports at risk

Amid escalating tensions in the Middle East following attacks between Iran and Israel, Bangladeshi shipping companies fear major disruptions in fuel imports if vessel movement through the strategic Strait of Hormuz is closed.

The armed confrontations between the two nations have already driven up global oil prices by over 7%. Shipping companies warn that if infrastructure or commercial shipping in the strait is targeted, the impact will ultimately be felt in the pockets of ordinary consumers.

They explained that in addition to a potential fuel oil crisis, disruptions in the supply of raw materials for coal power plants and liquefied natural gas (LNG) could also impact the domestic market. Load shedding may hamper industrial production, while operating costs for fuel oil-dependent businesses are expected to rise.

At the same time, transportation costs and overall inflation are likely to increase – burdens that will ultimately fall on the shoulders of ordinary people.

"If the Strait of Hormuz is closed, ships will be forced to take alternative, longer routes, which will naturally increase transportation costs," Azam J Chowdhury, chairman of the Bangladesh Ocean Going Ship Owners' Association, told TBS.

"Countries like Bangladesh, which are heavily dependent on oil imports, will be among the hardest hit," he added.

The Strait of Hormuz is a critical global shipping corridor, through which roughly one-fifth of the world's oil supply flows.

At any given moment, dozens of tankers are either entering or exiting the strait, as major oil and gas producers in the Middle East export energy to international markets.

Situated between Iran to the north and Oman and the United Arab Emirates (UAE) to the south, the strait links the Gulf to the Arabian Sea.

Oil price may rise by Tk4-Tk5 per litre next month: BPC

Global fuel prices have started to surge in the wake of the Iran-Israel conflict, with Brent crude futures rising 9.07% or $6.29 to reach $75.65 per barrel. At one point, prices peaked at $78.50 per barrel – the highest since 27 January.

The Bangladesh Petroleum Corporation (BPC) has said if the current trend continues, local fuel prices may increase by Tk4 to Tk5 per litre next month.

"We have to follow international market prices," said BPC Chairman Md Amin Ul Ahsan. "We calculate the monthly average and adjust prices accordingly. We are closely monitoring the situation."

The BPC further said in the event of a closure of the Strait of Hormuz, it is considering alternative routes through the Red Sea and the Arabian Sea.

However, the Red Sea route is not without risk either. In the past, attacks by Yemen's Houthi rebels disrupted shipping through this passage, leaving the Arabian Sea as the only reliable option.

Khairul Alam Sujon, vice president of the Bangladesh Freight Forwarders Association, said, "If the Iran-Israel war drags on, surrounding maritime zones will become insecure, forcing vessels to change routes. This will inevitably raise both shipping time and costs – a situation we've already seen during earlier Houthi attacks in the Red Sea."

BPC maintains 35-40 days of fuel reserve

According to the BPC, the country typically maintains a fuel reserve sufficient for 35 to 40 days, with about 4 lakh tonnes of oil in stock at any given time.

Speaking to TBS, Mani Lal Das, BPC's general manager (Commercial & Operations), said the Eastern Refinery has an annual capacity to refine around 1.5 million tonnes of crude oil. Of this, Bangladesh imports 6 to 7 lakh tonnes annually from Saudi Arabia and a similar volume from Abu Dhabi. In total, around 1.4 million tonnes of crude oil are imported each year via 14 tankers.

In addition, BPC imports refined oil under G2G deals with eight countries.

As per BPC data, Bangladesh's average annual demand for petroleum products – including diesel, petrol, octane, furnace oil, marine fuel, and jet fuel – stands at around 7.2 million tonnes. Among these, diesel accounts for the largest share. In the fiscal year 2023–24, the country imported 6.37 million tonnes of fuel oil.