Oil prices have jumped over 3.6 percent in international markets since Friday, after Soleimani was killed at Baghdad International Airport in Iraq
The Bangladesh oil market will heat up as the international market prices continue to surge following the violent demise of a top Iranian general in a US air strike.
According to media reports, oil prices have jumped over 3.6 percent in international markets since Friday, after Soleimani – commander of the Quds Force of Iran's Islamic Revolutionary Guards Corps – was killed at Baghdad International Airport in Iraq.
Bangladesh Petroleum Corporation (BPC) – the state-run company that imports oil for the country – said that Bangladesh will feel the heat if the oil prices keep the upswing in the international market.
"If the ongoing surge in oil prices continues due to the unrest in the Middle East, it will start hitting Bangladesh's market from the next week, as we have to import oil soon," said Mohammad Zahid Hossain, deputy general manager (commercial and operation) of the BPC.
"The stock of oil is enough to meet the local demand till this month, as another 30,000 tonnes of diesel is being unloaded now in Chattogram port," he added.
Meanwhile, several BPC sources reiterated that there is no reason to be worried and assured that even if the BPC needs to buy oil at a higher price, it would not increase the price in the local market.
Md Sarwar Alam, Director (Operations & Planning) of the BPC told The Business Standard, "We have gotten accustomed to the ups and downs in the international oil prices. Though we had to buy oil at a higher price from the international market, we did not hike prices in the local market.
"Sometimes we make profit. So, we cover our losses with profits."
He further said, "We are monitoring the international market status, if the upsurge continues, it will definitely heat up Bangladesh's market. Then we would make our next plan on how to cope with it."
If oil prices surge repeatedly, the government will have to disburse a subsidy to the country's lone oil importing agency, as it used to do a few years ago. In 2015, the state-owned petroleum importing agency received Tk600 crore in subsidy from the government for importing oil.
Currently, the BPC has a stock of around 320,000 tonnes of diesel, 20,000 tonnes of octane, 40,000 tonnes of jet fuel, 110,000 tonnes of furnace oil and 16,000 tonnes of Kerosene in all of its depots across the country.
Addressing the issue, economist and Vice-Chancellor of East Delta University, Professor Sikandar Khan said, "The government should strictly monitor our stock of oil, as the prices directly impact the people.
"We should have a long term plan, and we should access how much oil we should have in reserve at our depots. Otherwise, we will remain concerned over every incident of oil price hike in the international market."
He added that the government must make a serious effort to stock up on oil, as the ongoing development in the country depends on it.
Every month, Bangladesh has a demand for around 350,000 to 400,000 tonnes of diesel, 20,000 tonnes of Octane and 30,000 tonnes of Jet Fuel. The BPC sells 15,000 to 20,000 tonnes of Furnace oil every month. However, several private companies import furnace oil for power plants.
The BPC imports crude oil from Saudi Arabia and United Arab Emirates (UAE) under two methods. It imports 50 percent of the local demand under the Government to Government contract and the rest through open tenders.
Generally, the government agency opens LCs (letters of credit) one month before import, after calculating the stock of the previous month and the demand for next. In every three to four days, vessels carrying oil arrive at Bangladesh's seaports, each carrying 30,000 tonnes of oil on average.
The next consignment of 100,000 tonnes of crude oil is scheduled next month to arrive from Saudi Arabia and 350,000 tonnes of diesel oil from China and Singapore. If the price increases by this time, Bangladesh will have to buy the oil at a higher price.
The cost of opening LCs for importing oil will go up too, thereby impacting the market negatively.
The BPC is currently selling one litre of diesel for Tk62.5, jet fuel for Tk71, octane for Tk84.46, furnace oil for Tk42 and Kerosene for Tk63.36 in the local wholesale market. However, the company is selling per litre of diesel for Tk65, Octane at Tk89 at in petrol pumps, and per litre of Kerosene for Tk80 at retail shops.