How Bangladesh is managing its energy demand amid Gulf tensions

As geopolitical tensions across the Middle East show no signs of easing, the consequences for energy-importing countries like Bangladesh are no longer a distant concern but an immediate economic reality. 

In response to the oil shock resulting from the crisis in the Strait of Hormuz, the government is attempting to manage demand. Such demand-side management strategies include several measures to reduce consumption. For an import-dependent economy, even modest reductions in demand can translate into significant savings in foreign exchange and fiscal pressure.

Managing demand amid supply constraints

A key policy response in this regard is the government's plan to save approximately 3,100 MW of electricity per day. Currently, the daily generation of electricity stands at roughly 14,500 to 15,000 MW, out of a total installed capacity of 32,332 MW. This capacity includes captive, imported, renewable energy and net metering, and so the issue is not merely one of capacity but of efficient utilisation in the face of a supply shock. In economic terms, this is a shift from expanding supply to improving energy productivity, generating more output from each unit of energy consumed.

A global crisis, a domestic response

It is important to consider that the oil crisis triggered by the Iran-Israel-US conflict is not a challenge specific to Bangladesh. Across the globe, many countries are facing rising import bills, fiscal pressures, and overall economic instability due to the energy supply shock resulting from this crisis. 

While the strategy to search for alternative fuel sources to sustain electricity generation remains a widely considered option, the role of demand-side management tends to go overlooked, though it is a more immediate and practical tool for managing such crises. 

Globally, energy efficiency is increasingly recognised as the "first fuel", the quickest and most cost-effective way to reduce energy demand while maintaining economic activity.

Austerity as energy policy

Additionally, as part of the government's austerity measures, the Prime Minister, ministers, and state ministers will reduce their monthly fuel allocation for official vehicles by 30%, while the use of fuel, electricity, and gas in government offices will also be reduced by 30%. Besides, hospitality expenses for meetings and seminars are also planned to be reduced, and to conserve electricity, all decorative lighting must be avoided for the next three months. Empirical evidence consistently shows that the cost of saving energy is often significantly lower than the cost of generating it, making conservation a financially sound policy choice.

Moreover, except for emergency services, all office buildings and commercial establishments must close by 6 pm, with shopping malls directed to close at 7pm. The idea in this scenario is to target a reduction in electricity demand of approximately one-fifth of current consumption without causing long-term disruption to economic activity. Energy experts often argue that saving 1 MW of electricity is faster, more feasible, and more cost-effective than producing an additional megawatt.

Why demand-side management matters now

As a policy response to an energy shock, demand-side management focuses on the quantity and timing of energy consumption rather than increased production. Historically, such strategies have proven effective during crises, as per the International Energy Agency (IEA). 

Recently, the agency has deemed demand-side management a "critical and immediate tool to reduce pressure," as doing so improves affordability and strengthens energy security. Additionally, such measures can lower consumer costs, ease market pressures, and help preserve fuels for essential uses while the conflict persists. At the system level, these measures also help reduce peak load demand and improve overall grid efficiency, lowering operational and financial stress on the power sector.

Balancing control and fairness

The current strategy of the Bangladesh government is a reflection of these realities. As supply-side solutions, such as securing fuel imports and expanding generation capacity, depend on global market conditions influenced by geopolitical uncertainties beyond the control of energy-importing nations, it would not be optimal to focus solely on them. Besides, energy consumption reduction initiatives in the public sector, by curtailing fuel allocation and office hours, signal an effort to more evenly distribute the burden of adjustment. 

Another example of this conservation focus is the suspension of government-funded foreign training programmes. Such measures also highlight an important policy shift: managing demand is not just a technical issue, but a question of governance and resource prioritisation.

Additionally, internal training and seminar-related expenditures have been instructed to be reduced by half, and a complete halt has been ordered on the procurement of vehicles, vessels, aircraft, and computers. Furthermore, travel expenses have decreased by 30%. Alongside these cuts, the government's decision to restrict banking and commercial service hours, except in emergencies, helps flatten evening peak electricity demand.

Behavioural change and enforcement

Although these decisions may seem like simple budget tightening, they are part of demand-side management strategies in which the government deliberately restrains consumption through administrative controls. Considering the volatile nature of the Iran-Israel-US conflict, the government's emphasis on conservation and austerity measures appears strategically sound, especially as immediate supply-side adjustments may not be adequate. Such initiatives aim to set a precedent for broader societal compliance and to achieve demand reductions without requiring major infrastructure change. 

However, long-term success will depend on sustained behavioural change and the adoption of energy-efficient technologies across households and industries.

The nationwide three-month ban on decorative lighting is part of this effort to promote broader public compliance. In doing so, the government has targeted non-essential consumption, which can have significant positive effects on aggregate output. Public awareness campaigns are being rolled out through print and electronic media to encourage citizens to adopt energy-saving practices. In addition, where necessary, mobile courts are ready to enforce compliance. Such a combination of persuasion and enforcement reflects the government's understanding of the behavioural dimension of energy consumption.

Protecting critical sectors

However, such a set of strategies is not uniformly restrictive, as evidenced by the selective prioritisation of the agricultural and industrial sectors. Irrigation, as well as fertiliser production and distribution systems, have been provided with priority access to energy to ensure that agricultural output—particularly food production, remains uninterrupted. 

Moreover, energy supply in industries is also being protected to support continued production. These targeted prioritisation measures demonstrate the authorities' intent to redirect energy consumption towards critical sectors, reflecting an early form of strategic resource allocation. This aligns with the broader objective of ensuring that limited energy resources are channelled towards sectors with the highest economic and social returns.

Instances of such thinking are also observed in other government measures, including the approval of proposals to import electric buses at zero tariff for educational institutions and at a total duty of 20% for other cases. This measure reflects an effort to reduce dependence on fossil fuels in the transport sector, which is timely, especially as transportation accounts for around 45% of global oil demand, according to the IEA. At the same time, this introduces a broader environmental dimension to the government's policy response.

From short-term response to long-term resilience

To this end, some of the measures taken by the Bangladesh government reflect a growing recognition that recurring energy shocks require structural responses. However, their effectiveness will depend on implementation and sustained compliance by the broader population. The country's informal sector requires careful regulation that ensures equity, as restrictions may disproportionately affect lower-income groups. While the agricultural and industrial sectors have been prioritised, disruptions in fuel supply could still indirectly affect them.

In a world where geopolitical instability directly affects national energy security, demand-side management is not merely a temporary adjustment but a practical necessity. For Bangladesh, the current crisis should serve as a reminder that resilience during energy shocks depends not only on how much power a country can generate, but also on how intelligently it manages consumption. 

Energy being the lifeblood of an economy, it is essential that this understanding translates into collective action to ensure a stable and resilient economic future. Strengthening energy efficiency today can reduce future import dependence, improve fiscal stability, and enhance long-term economic resilience.

Sketch: TBS

Sakib Bin Amin is a Professor of Economics at North South University, specialising in energy economics and policy.

Disclaimer: The views and opinions expressed in this article are those of the author and do not necessarily reflect the opinions and views of The Business Standard.