Bangladesh Defense
Saif
Senior Member
- Messages
- 17,499
- Likes
- 8,438
- Nation
- Residence
- Axis Group
Iran war threatens our energy lifeline
Govt must urgently plan to manage potential LNG shortages amidst Iran war.
Iran war threatens our energy lifeline
Govt must urgently plan to manage potential LNG shortages
5 March 2025, 19:30 PM
UPDATED 10 hour(s) ago
VISUAL: STAR
As conflict fractures the Middle East following US and Israeli strikes on Iran and the subsequent closure of the Strait of Hormuz, economic repercussions are no longer confined to the Gulf. The shockwaves are already reaching South Asia, including Bangladesh. Faced with the prospect of a severe squeeze on fuel supplies, the government appears to be shifting from caution to urgency. Officials are reportedly preparing sector-wise rationing and potential power cuts to manage dwindling energy availability. The message to the public is simple: use energy sparingly, or be prepared to go without it.
To understand the scale of the threat to Bangladesh is to recognise the fragile, hyper-connected architecture of the modern energy market. According to a recent analysis by BRAC EPL Stock Brokerage, every $10 increase in global oil prices raises Bangladesh’s monthly import bill by roughly $80 million. That vulnerability is particularly acute given that the country imports the overwhelming majority of its petroleum. Bangladesh spends about $1 billion annually to bring in about 60 lakh tonnes of petroleum products, mostly through the Strait of Hormuz. Oil markets are already reacting. Brent crude, the benchmark for roughly two-thirds of the world’s internationally traded oil, has climbed past $82 a barrel. Analysts warn that a prolonged blockade of Hormuz could easily push prices beyond the $100 mark. New price levels will sharply increase energy costs for Bangladesh, which purchased crude oil at an average price of about $72 per barrel in 2025.
The more immediate vulnerability, however, lies in liquefied natural gas. Bangladesh meets nearly 30 percent of its gas demand through imported LNG, making it highly exposed to volatility in global spot markets. Petrobangla recently issued two tenders for LNG purchases—the new government’s first attempt to procure cargoes from the spot market—but suppliers appear to be holding back, betting that prices will climb further.
The consequences could quickly spill over into the broader economy. Persistently higher energy costs would feed inflationary pressures just as policymakers hope to stabilise prices. If that happens, the central bank may be forced to reconsider its plans for monetary easing, slowing growth at a delicate moment when the economy is attempting to regain momentum.
The government should move swiftly to activate contingency plans that can temporarily offset LNG shortages. Ensuring adequate dollar liquidity for commercial banks will be equally important so that letters of credit for essential imports—particularly fuel—continue to flow. At the same time, tighter restrictions on luxury imports may be necessary to conserve foreign exchange reserves. The current crisis also exposes a deeper structural weakness. Bangladesh’s long-delayed transition towards renewable energy has now become an economic imperative. For decades, policymakers have tethered the country’s growth model to imported fossil fuels, assuming global supply chains would remain uninterrupted. The closure of Hormuz is a reminder that such assumptions can collapse overnight.
Govt must urgently plan to manage potential LNG shortages
5 March 2025, 19:30 PM
UPDATED 10 hour(s) ago
VISUAL: STAR
As conflict fractures the Middle East following US and Israeli strikes on Iran and the subsequent closure of the Strait of Hormuz, economic repercussions are no longer confined to the Gulf. The shockwaves are already reaching South Asia, including Bangladesh. Faced with the prospect of a severe squeeze on fuel supplies, the government appears to be shifting from caution to urgency. Officials are reportedly preparing sector-wise rationing and potential power cuts to manage dwindling energy availability. The message to the public is simple: use energy sparingly, or be prepared to go without it.
To understand the scale of the threat to Bangladesh is to recognise the fragile, hyper-connected architecture of the modern energy market. According to a recent analysis by BRAC EPL Stock Brokerage, every $10 increase in global oil prices raises Bangladesh’s monthly import bill by roughly $80 million. That vulnerability is particularly acute given that the country imports the overwhelming majority of its petroleum. Bangladesh spends about $1 billion annually to bring in about 60 lakh tonnes of petroleum products, mostly through the Strait of Hormuz. Oil markets are already reacting. Brent crude, the benchmark for roughly two-thirds of the world’s internationally traded oil, has climbed past $82 a barrel. Analysts warn that a prolonged blockade of Hormuz could easily push prices beyond the $100 mark. New price levels will sharply increase energy costs for Bangladesh, which purchased crude oil at an average price of about $72 per barrel in 2025.
The more immediate vulnerability, however, lies in liquefied natural gas. Bangladesh meets nearly 30 percent of its gas demand through imported LNG, making it highly exposed to volatility in global spot markets. Petrobangla recently issued two tenders for LNG purchases—the new government’s first attempt to procure cargoes from the spot market—but suppliers appear to be holding back, betting that prices will climb further.
The consequences could quickly spill over into the broader economy. Persistently higher energy costs would feed inflationary pressures just as policymakers hope to stabilise prices. If that happens, the central bank may be forced to reconsider its plans for monetary easing, slowing growth at a delicate moment when the economy is attempting to regain momentum.
The government should move swiftly to activate contingency plans that can temporarily offset LNG shortages. Ensuring adequate dollar liquidity for commercial banks will be equally important so that letters of credit for essential imports—particularly fuel—continue to flow. At the same time, tighter restrictions on luxury imports may be necessary to conserve foreign exchange reserves. The current crisis also exposes a deeper structural weakness. Bangladesh’s long-delayed transition towards renewable energy has now become an economic imperative. For decades, policymakers have tethered the country’s growth model to imported fossil fuels, assuming global supply chains would remain uninterrupted. The closure of Hormuz is a reminder that such assumptions can collapse overnight.
