Research Article, ISSN 2304-2613 (Print); ISSN 2305-8730 (Online)
Copyright ©
CC-BY-NC 2014
, Asian Business Consortium |
ABR
Page 41
Global Oil Price and Its Economic Impact in Bangladesh
Shirin Sultana, Md. Nasim Uddin
*
Senior Lecturer, School of Business, Asian University of Bangladesh, Uttara Model Town, Dhaka-1230, BANGLADESH
*
E-mail for correspondence: h1n1flue09@gmail.com
https://doi.org/10.18034/abr.v8i1.148
ABSTRACT
This paper highlighted the plummeting price of oil that is at present the most sensational energy story
in the world. This research work outlined the main reasons for the current situation is the low demand
for oil as well as concerned companies found it more profitable to extract oil by unconventional
methods. In Bangladesh, no changes have been made in the oil price. By figure, at present (June 2017)
BPC (Bangladesh Petroleum Corporation) is making profit of Tk 13.77 per liter of Kerosene, of Tk 14.68
per liter of Diesel, of Tk 19.57 per liter of Furnace oil and of Tk 18.75 per liter of jet fuel oil where the
very latest world crude oil price come down $ 35.62. The present study is done to make the overview
of the world oil prices and Bangladesh as well using purely secondary data collected mostly from
newspaper reports, websites, magazines, journals, periodic, reviews and various published data. This
study also investigates the impact of the sharp fall oil price to the economy of Bangladesh. In the study,
there is seen negatively correlation with the oil price of the world and that of Bangladesh. This paper
will be useful to the all stakeholders even policy makers to take proper initiatives for the adjustment
of the plummeting oil price of the world. This present study may disseminate that the BPC, as the
government-sponsored firm, cannot make the maximum profit as like the Monopoly Company in
Bangladesh, so, the retail consumer may give the benefits of the adjustment with the sharp oil price
fall in the world.
Key words: BPC, GDP, CPI, Petroleum, Plummeting, Secondary Data
INTRODUCTION
In fact, Bangladesh has been experiencing a vigorous rate
of GDP (Gross Domestic Product) growth for the duration
of the sixth plan period, and at the similar time, it has
effectively attainment a noteworthy decline in the rate of
inflation. The result shows becoming the middle lower
income country of the world. In the figure, the GDP of
Bangladesh in the fiscal year of 2015, it is forecasted at
6.4% that is 4.92% more than the year of 2014.
Besides, the inflation rate in the year 2017 also forecasted at
6.5% that will be 12.16% less than the year of 2014. In spite
of continuous pervasiveness of an ambiance of “democratic
discomfort,” Bangladesh’s financial year 2014-15 (FY2015)
is final with some macroeconomic reward as well as minor
inflation, decreasing interest rate, steady exchange rate,
controllable financial insufficiency, positive equilibrium of
payment and enlarged foreign exchange reserves. In fact,
the current account of the balance of payments is expected
to show a higher surplus at 1.5% of GDP in the fiscal year
2015 that is up from 0.9% in 2014. Export earnings enlarged
at a superior rate than imports, and export-GDP ratio
greater than before in the 2014 whereas import-GDP ratio
decreased. Notwithstanding political disorder, structural
obstacle, and worldwide unpredictability, the Bangladeshi
economy is keeping macroeconomic steadiness and
poignant onward. The worldwide improvement, well-built
home demand enlargement, and unremitting macro
permanence divine healthy for Bangladesh’s GDP
intensification and scarcity diminution. Though domestic
production, particularly that of rice influences output and
price stability, inflation in Bangladesh is also largely
determined by international prices since the country has to
depend on some essential commodities including
petroleum products. In Bangladesh, 45% of the fuel uses in
the transport sector, 25% in the power sector, 19% in the
agriculture sector, 4% in the industries and 7% in the
household sector. Therefore minor prices of food and oil at
the worldwide marketplace at current have been a well-
known issue for the decrease inflation velocity. The squat
stage of worldwide goods prices together with that of oil
has also given some reprieve regarding funds required to
meet up subsidy demands. Many infrastructures, vehicles,
manufacturing industries, house hold works are managed
Sultana and Uddin: Global Oil Price and Its Economic Impact in Bangladesh (41-48)
Page 42 Asian Business Review ● Volume 8 ●Number 1/2018
using oil as the key fuel in Bangladesh. Bangladesh is a net
oil importer. Bangladesh is completely reliant on imports
for meeting up its demand for petroleum goods. According
to government data, the country imported 53.51 lakh tons
of petroleum products worth Tk 36,587 crore in fiscal 2013-
14 Of the money, 65 percent expenses on diesel import.
According to the finance ministry of Bangladesh, the
government has to support financially fuel imports to
reduce customers in opposition to price shocks. It used up
Tk 7,350 crore on fuel subsidies in 2013-14, downhill from
Tk 13,558 crore in the preceding year.
A well-built justification for subsidizing power is to hold up
access to power for the deprived. While there's some extent
of truth to the current argument, energy subsidies usually
profit wealthier segments of society disproportionately, as
long as they use additional energy. This is often true in East
Pakistan, wherever the poor square measure largely
addicted to ancient biomass and has very little access to
electricity and alternative public utilities.
Energy subsidies conjointly divert public funds from social
programs and welfare schemes which will be of bigger
profit to the poor. Even so, a rise in energy prices will have
a disproportionate impact on poorer voters if adequate social
safety nets don't seem to be in situ. Governments conjointly
give energy subsidies to support vital components of the
economy. As an example, energy subsidies play a crucial role
in Bangladesh’s agriculture sector that employs nearly half
the country’s labor. Bangladesh’s agricultural sector depends
heavily on energy-intensive irrigation, particularly
throughout the time of year.
Nearly eighty seven percent of the irrigation
instrumentality is run on diesel, accounting for nearly
seventy one percent of the world beneath mechanized
irrigation. Naturally, shortages or worth hikes in power
or fuel result in higher production prices and, afterwards
to higher market costs for agricultural product,
significantly rice, the staple food. World oil costs have
gone record low throughout the last many months. Lower
oil worth within the world market could be a blessing for
East Pakistan because it will save exchange that
successively may be used for alternative imports.
A Wall Street Journal report on August 23, 2015 said the
price of crude oil dropped to $40 a barrel, lowest since
March 2009. The oil prices also fell in Europe that is on
August 2015, a barrel of oil was sold at $45.46. West Texas
Intermediate prices for October, 2015 delivery dropped to
$39.86 per barrel on the New York Mercantile Exchange.
In this present paper the researcher has presented the
review regarding the plummeting oil price and its impact
on the economy of Bangladesh using the secondary data.
LITERATURES REVIEW
Review of literature is an integral part of conducting a
research. Review of past literature helps conceptualization,
formulation and choice of tools of analysis. It also helps in
arriving at meaningful conclusions. With this view a brief
review of past studies and concepts relevant to the present
study are highlighted in below.
Rahman, M. (2015) the low level of worldwide trade goods
costs together with that of oil has conjointly provided some
respite in terms of resources required to satisfy grant
demands. Developing countries of Asia managed to
accelerate their growth rates, with Asian nation and also the
association countries being within the lead (ADB, 2015). On
the opposite hand, the most important economies within the
international economic frontier (i.e. the use of America,
countries within the Common Market, associate degreed
Japan) are growing at an uneven pace, limiting the world
growth prospects to solely three per cent in 2015, as projected
by the planet Bank (2015).
Tabassum, T., (2015) opined that the plummeting price of
oil is, at present, the most sensational energy story in the
world. For much of the past decade, because of soaring oil
consumption in countries like China and conflicts in key oil
nations like Iraq, oil production could hardly cope with the
demand-thus causing prices to spike. But many of these
dynamics were rapidly shifting, till prices dropped steeply
in September 2014 while wreaking havoc on oil-producing
countries economies, this is proving to be a boon for oil
importing countries.
Rahman, S. (2014) mentioned in his research paper that
the economic system is getting the advantages of the
falling expenditures of oil as the government’s spending on
subsidy will go down extensively and stability of
repayments will be healthier. If people get the fee benefits,
both the value of doing business and inflation will fall.
Haque, A. K. E. (2007) told that a total of five different world
oil price scenarios have been used to simulate impact of
world oil price changes. The base scenario (BASE) is set to
understand ‘what if’ the world oil price remains where it
was in 2002 prior to price rise. This can be compared with
reduced oil demand (ROD) scenario in which price of oil
was set to rise until it triggers a change in the demand for
oil and people switch to substitute sources of energy.
Taslim M. A. (2014) opined that usually, lower oil prices
helps reduce the cost of living by lowering transport costs
and bringing down inflation. Lower oil prices also pass
through directly into lower fuel costs and retail electricity
prices.
M Tamim, M. (2015) also mentioned that Bangladesh has
always subsidized diesel and Octane/petrol has been
used for cross subsidy. Agriculture uses only 30% diesel
and the subsidy has continued in its name. Ideally all
prices should be market based but Government cannot
maintain a fuel price based tariff formula in the transport
sector. Because of that consumers never get the benefit
when the price drops. Furnace oil is being used to produce
electricity only and that can be easily controlled as the
entire matter is with the government.
Research Article, ISSN 2304-2613 (Print); ISSN 2305-8730 (Online)
Copyright ©
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, Asian Business Consortium |
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OBJECTIVES OF THE STUDY
The major objective of the study is to investigate the existing
practices of oil price trends and its impact on the economy
of Bangladesh. The specific objectives are:
To overview the existing oil import and its value in
Bangladesh.
To show the comparative historical oil price in the
World and Bangladesh.
To measure the financial trends of the historical oil
price movement in Bangladesh.
To show the relationship among the oil price elasticity
and GDP & CPI in South Asia.
To examine the economic impacts of oil price
movement in Bangladesh.
RATIONALE OF THE STUDY
Bangladesh oil and gas market is experiencing major changes
in new project development, consumption patterns and
market scenario amidst rapidly shifting global dynamics.
This research work provides analysis of historical oil price of
Bangladesh & the World and its key impacts associated
challenges facing Bangladesh markets. The price of Brent
crude oil, the major trading classification of sweet light crude
oil that serves as a major benchmark price for purchase of oil
worldwide, slumped below per barrel, its lowest level since
2010. The present study is done to analyze that the lower oil
prices if sustain should have a positive effect on domestic
growth. In theory, the fall in oil prices could lead to higher
purchasing power and consumer spending and hence add to
real GDP. Moreover, this study is also done to know the
impact of lower oil prices that is broadly positive to oil
importers like Bangladesh.
LIMITATIONS OF THE STUDY
This research has some limitations and future work can be
done. Due to lack of time of the researcher, the study has
been done using purely secondary data and no primary
data is used. This research was conducted mostly in a
quantitative way. It will be better to continue some
qualitative research and make comparison between
qualitative and quantitative results to know the accurate
rationality of the selected topic and fields. Considering of
all the limitations of this study, the researcher thinks that in
future it will be convenient for the researchers to deal with
any gap derived from this study.
METHODS AND MATERIALS
The study is expressive as well as investigative in nature
and based on merely secondary data collected from
relevant research reports & publications, annual reports,
periodic, journals, reviews, newspaper reports, magazines,
website and books. Although a mild volume of facts are
collected from the important sources by using interviews of
the some filling stations and the strength experts. The
collected data regarding the oil price has been analyzed
using MS-Office and simple statistical techniques like table,
graphs, percentage and growth for drawing inferences.
ANALYSIS AND FINDINGS
Oil prices are free-fall since last few years. The price of West
Texas Intermediate crude oil June 2014 was around at $ 108 a
barrel. This price has sharply fallen by around 65% and stood
at $ 38 a barrel in August 24, 2015. Now the price stood at $
39.68 a barrel in December 15, 2017. The following table 1
shows the historical 10 years average oil price in the world.
Table: 1: World Average Crude Oil Price
Year
As on December
Dollar in Per Barrel
BDT in Per Barrel
% Change
2007
59.4
4752
-
2008
62.0
4960
4.37
2009
91.7
7336
47.90
2010
41.0
3280
-53.19
2011
74.30
5944
81.22
2012
89.04
7123.2
19.84
2013
98.57
7885.6
10.70
2014
88.25
7060
-11.47
2015
97.63
7810.4
10.63
2016
59.29
4743.2
-40.18
2017
35.62
2849.6
-40.92
Mean
72.44
5795.2
2.98
Source: NASDAQ
The above table 1 shows the historic world crude oil price
per barrel and its change in percentage where the base year
shows the price of $ 59.4 followed by upwards trends $ 62
and 91.7 in the years of 2008 and 2009 respectively. But in
the year of 2010 the massive downwards change of oil price
has been made as a result the price stood at $ 41.0 with the
change of -53.19%.
Graph 1: World Average Crude Oil Price
But again from 2011 the price had the upwards trend since
the year of 2015. Then the price frequently change,
particularly the price of the oil can be showed by month of
the recent time to know its frequent change such as January
2016 $ 94.62, April 2016 $ 102.07, June 2016 $ 105.79, July 2016
$ 103.59, August 2016 $ 96.54, September 2016 $ 93.21,
October 2016 $ 84.40, November 2016 $ 75.79, December 2016
$ 59.29, January 2017 $ 47.22, February 2017 $ 50.58, March
Sultana and Uddin: Global Oil Price and Its Economic Impact in Bangladesh (41-48)
Page 44 Asian Business Review ● Volume 8 ●Number 1/2018
2017 $ 47.82, June 2017 $ 54.5. the average price from 2007 to
2017 becomes $ 72.44 with the percentage change 2.98. The
above graph can also present the historical oil price and its
changing dimension from the year of 2007 to 2017 at a glance.
Table 2: Quantity of Imported Oil and its Price
Year
Crude oil
Refined products (HSD,
SKO, Jet & Mogas)
HSFO
Total
Statistics
Qnty.
(Mt)
Price
(Cr. Tk)
Qnty.
(Mt)
Price
(Cr. Tk)
Qnty.
( Mt.)
Price
(Cr.Tk)
Qnty
(Mt.)
Price
(Cr. Tk)
Mean
Qnty
Mean
Price
2007-08
1253285
3750.69
2380533
9382.77
0
0
3633818
13133.46
1211273
4377.82
2008-09
1211037
3985.02
2536535
10446.2
0
0
3747572
14431.22
1249191
4810.407
2009-10
1040084
5093.69
2273263
14343.04
0
0
3313347
19436.73
1104449
6478.91
2010-11
860877
3431.4
2507819
10945.24
29920
60.38
3398616
14437.02
1132872
4812.34
2011-12
1136567
4701.54
2634212
12028.18
0
0
3770779
16729.72
1256926
5576.573
2012-13
1409302
7037.00
3259344
20280.52
230431
1123.17
4899077
28440.69
1633026
9480.23
2013-14
1083467
7053.51
3409934
27111.24
680982
3819.07
5174383
37983.82
1724794
12661.27
2014-15
1292102
8536.70
2827160.29
219493.10
803603.36
4367.26
4922866
232397.1
1640955
77465.69
2015-16
1176693
7957.29
3158343.00
23485.56
1016101
5144.68
5351137
36587.53
1783712
12195.84
2016-17
1303194
5739.35
3403889.76
18569.62
691704.62
2714.30
5398789
27023.27
1799596
9007.757
Total
11766609
57286.19
28391033
366085.5
3452742
17228.86
43610384
440600.5
Mean
1176661
5728.619
2839103
36608.55
345274.2
1722.886
4361038
44060.05
S.D.
3060312
14974.75
7386658
111597.6
969251.9
4856.80
11356762
129440.6
Note: SKO- Superior Kerosene Oil, HSFO- High Sulphur Furnace Oil, MOGAS- Motor Gasoline
Source: Bangladesh Petroleum Corporation
The above table shows the quantity of imported oil in metric
ton and its value in BDT (Crore). The table shows 10 years
quantity and value of Crude Oil, Refined products, High
Sulphur Furnace Oil in Bangladesh where total crude oil
11,766609 Mt of BDT (Crore) 57,286.19, refined product
28,391033 Mt of BDT (Crore) 36,6085.5 and HSFO 43, 610384
Mt of BDT (Crore) 44, 0600.5 imported as the net import
country of the world. By year wise the highest average value
of all products is BDT (Crore) 17, 99, 596 in 2016-2017 while
the lowest BDT (Crore) 1,21,1273 in the year of 2007-
2008.Moreover, the total oil imported from 2005-06 to 2014-
2015 of 4, 36, 10,384 Mt of BDT (Crore) 44, 0600.
Table 3: Average Unit Price of Petroleum Products Import
Fiscal Year
Crude Oil
Refined Oil
Lube Oil
US $/bbl
BDT/bbl
% Change
US $/bbl
BDT/bbl
%Change
US $/bbl
BDT/bbl
%Change
2007-08
59.04
4723.2
-
75.92
6073.6
-
140.43
11234.4
-
2008-09
63.59
5087.2
7.71
78.31
6264.8
3.15
119.03
9522.4
-15.24
2009-10
95.70
7656
50.49
119.07
9525.6
52.05
122.16
9772.8
2.63
2010-11
76.87
6149.6
-20.68
83.04
6643.2
-31.26
99.73
7978.4
-19.37
2011-12
75.66
6052.8
-2.57
86.17
6893.6
3.77
142.38
11390.4
42.77
2012-13
93.13
7450.4
23.09
113.69
9095.2
31.94
179.85
14388
26.32
2013-14
112.95
9036
21.28
128.30
10264
12.85
178.63
14290.4
-0.67
2014-15
109.22
8737.6
-4.30
127.70
10216
-0.47
142.04
11363.2
-20.40
2015-16
109.60
8768
0.35
125.27
10021.6
-2.81
-
-
-
2016-17
75.23
6018.4
-32.35
90.16
7212.8
-28.03
-
-
-
Mean
87.10
6968
15.78
102.76
8220.8
13.98
140.53
11242.4
-
S.D.
19.69
1575.2
21.88
1750.4
-
27.95
2275
Source: Bangladesh Petroleum Corporation
The table 3 shows the per barrel oil price imported by
Bangladesh from the year of 2007-08 to 2016-17 where the
products are crude oil, refined oil and lube oil. The mean
prices of the oil are $ 87.10 of crude oil, $ 102.76 of refined
product and $ 140.53 of lube oil. The deviations of the
mentioned oil price over the periods are seen $ 19.69, $
21.88 and $ 27.95 respectively. The percentage changes
over the year are also mentioned here.
Table 4 shows the unit retail selling price of the petroleum
products in Bangladesh with the percentage changes
during the period of 2011 to 2017. It is seen that the price
of the petroleum product of the mentioned periods are
always upwards trends. Though, from the year of 2016 to
the present the piece is remained unchanged because of
the sharp fall of the world oil price. The percentage of the
change from year to year is also significant.
Research Article, ISSN 2304-2613 (Print); ISSN 2305-8730 (Online)
Copyright ©
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Table 4: Selling Price of Petroleum Product in Bangladesh
(BDT/Liter)
Petroleum
products
2011
2012
2013
2014
2015
2016
2017
Kerosene
32.37
40.00
56.00
61
68
68
68
% Change
-
23.57%
40%
8.93%
11.47%
0%
0%
Diesel
44.25
46.18
56.00
61
68
68
68
% Change
-
4.36%
21.26%
8.93%
11.47%
0%
0%
Petrol
74.70
80.50
86
91
96
96
96
% Change
-
7.76%
6.83%
5.81%
5.49%
0%
0%
Octane
77.70
84.50
89
94
99
99
99
% Change
-
8.75%
5.33%
5.62%
5.32%
0%
0%
Furnace oil
14.00
20.00
55.00
56.00
60
60
60
% Change
-
42.86%
175%
1.82%
7.14%
0%
0%
Source: Bangladesh Petroleum Corporation
The table 5 shows the Pearson correlation matrix among
the unit prices of world average crude oil, imported crude
oil and refined oil by Bangladesh. Here viewed all
negative correlations between the unit promoting fee of all
petroleum merchandise of Bangladesh and that of World
common crude oil and imported oil price by means of
Bangladesh. Particularly the price of petrol and octane are
showing high negative correlations that means the price
of the world oil is in downwards trend but the price in
Bangladesh is upwards trends.
Table 5: Pearson Correlation Matrix
Unit Price
Kerosene
Unit Price
Diesel
Unit Price
Petrol
Unit Price
Octane
Unit Price
Furnace
World Average
Crude oil Price
-0.791
-0.672
-0.962
-0.945
-0.517
Unit Price Crude
Oil Imported
-0.593
-0.703
-0.615
-0.495
-0.532
Unit Price Refined
Oil Imported
-0.811
-0.841
-0.723
-0.586
-0.750
The table 6 shows the comparative oil price as on
December 2015 in both UD and BDT where World, India
and Bangladesh are taken as the sample. In the table we
can see the difference of the oil price of two most used
petroleum products by the general public Diesel and
Petrol. In case of diesel the selling price is BDT 4.80 more
than world price and BDT 8 more than India.
Table 6: Present Comparative Oil Price
Petroleum
Product
As on December 2015, $ 1= BDT 80
World
India
Bangladesh
Diesel
$ 0.79 or
BDT-63.20
$ 0.75 or
BDT 60.0
$ 0.85 or
BDT 68
Petrol
$ 1.01 or
BDT 80.80
$ 0.95 or
BDT 76.0
$ 1.20 or
BDT 96
On the other hand, the selling price of the petrol is much
higher than both World and India the difference is BDT
15.20 from World price and BDT 20 from that of India.
This table is showing the profit margin and the present
financial gain by the Bangladesh Petroleum Corporation.
The next portion will be highlighted the loss and profit
statement of BPC over the 10 year periods.
Table 7: Statement of Profit/(Loss) and Contribution to
National Exchequer
Year
Loss by BPC
(BDT in Crore)
Contribution to
National Exchequer
2003-2004
(780.16)
3033.00
2004-2005
(7.61)
2766.00
2005-2006
(958.93)
3087.27
2006-2007
(2317.88)
2458.95
2007-2008
(3337.78)
2620.26
2008-2009
(2314.63)
2756.55
2009-2010
(7050.30)
3003.61
2010-2011
(1022.63)
1908.99
2011-2012
(2571.22)
2324.25
2012-2013
(9799.91)
3508.50
2013-2014
(11789.59)
4659.77
2014-2015
(5368.70)
4794.42
2015-2016
(2477.73)
4854.06
2016-2017
5268.08
5448.61
Mean
(3180.64)
3373.16
Source: Bangladesh Petroleum Corporation
The profit and loss account during the 2003 to 2017 where
almost every year Bangladesh Petroleum Corporation has
been experienced losses. But in the year of 2016 to 2017 till
June the corporation gained profit of the amount of Tk.
5,268.08 crore. Particularly, the profit margin is Tk 13.77
per liter for kerosene, Tk 14.68 for diesel, Tk 19.57 for
furnace oil and Tk 18.75 for jet fuel. Moreover, the
production cost of octane is Tk 56.85 per liter but the
customers are buying it for Tk 99, giving the state-run
corporation a profit of Tk 35.49 per liter. In the table 5 also
shows the contribution of Bangladesh Petroleum
Corporation towards National Exchequer.
Graph 2: The Elasticity of Gdp to Oil Prices Varies Widely
Across South Asian Countries
Source: World Bank Staff Calculations Based on World
Bank, IMF and National Authorities Data
Graph 3: The Elasticity of Cpi to Oil Prices Varies Widely
Across South Asian Countries
Source: World Bank Staff Calculations Based on World
Bank, IMF and National Authorities Data
Sultana and Uddin: Global Oil Price and Its Economic Impact in Bangladesh (41-48)
Page 46 Asian Business Review ● Volume 8 ●Number 1/2018
Graphs 2 & 3 are showing the elasticity of GDP (Gross
Domestic Product) and CPI (Consumer Price Index) to the
Oil Price of the countries of south Asian region. The
variation of the both graphs shows the relationships of oil
price with GDP & CPI of Bangladesh in comparing with
other showed countries where Bangladesh is in the weak
position in the very recent time especially in 2017 because
BPC is doing more profit than the cost of the oil.
Ultimately the public has to pay more price than the world
and the south Asian countries.
The economy of Bangladesh is expected to benefit from
the dramatic fall in oil prices that continued to zoom out.
The consequent consumer benefit depends on the price
adjustment at the domestic market commensurate with
the international price. Lower oil expenditures helps
decrease the cost of living via low transport expenses and
bringing down inflation. Lower oil costs additionally pass
by through at once into decrease gas prices and retail
electrical energy prices.
Though the world oil price have been fallen and
government of Bangladesh is imported the oil at
decreased rate but the government is not willing to reduce
the selling price of the oil because at past BPC has to spend
Tk12, 000 crore per year as subsidy for the purpose of oil.
To be mentionable here that BPC is making profit margin
Tk 13.77 per liter for kerosene, Tk 14.68 for diesel, Tk 19.57
for furnace oil and Tk 18.75 for jet fuel. Moreover, the
production cost of octane is Tk 56.85 per liter but the
customers are buying it for Tk 99, giving the state-run
corporation a profit of Tk 35.49 per liter. In view of the fact
that worldwide fuel prices started to fall in mid-2016,
domestic fuel prices have not been adjusted. Fuel
subsidies have effectively turned negative, and the
authorities have not indicated any plans to adjust them in
the near term. In this respect the impact of the reduced oil
price to the economy of Bangladesh might be as;
The oil exporting countries are suffering economic and
political turbulence from the sharp fall of oil price.
However, Bangladesh is standing in the green zone and
getting the benefits from falling oil price as an imported.
However, the retail consumers and business enterprises of
Bangladesh have not benefited despite of the falling oil
price. Lower oil costs if preserve ought to have a nice
impact on domestic growth. In theory, the fall in oil
expenditures may lead to greater purchasing electricity
and hence add to actual GDP.
The effect of decrease oil expenses is broadly high- quality
to oil importers like Bangladesh. The authorities have to
spend billions of dollars as oil import consignment every
year. The fall in oil prices, therefore, convert into massive
overseas trade savings. They have an effect on of the
falling oil prices has contributed in saving foreign
currencies as reflected in the LC opening figures. The price
of LC opening fell about 20% in the July-October period of
2015 as compared to the identical period last year.
Lower oil expenses will minimize transport costs,
production costs and mills expenses (diesel is a
predominant supply of electricity used in rice farming).
Though in June 2014 inflation price got here down to
decrease than 6 percent, the ordinary inflation at some point
of FY2014 went up to 7.5% in opposition to a target of 7% in
the Monetary Policy Statement (MPS) of Bangladesh Bank
announced in January 2014. High food inflation led to a
greater inflation. This was by and large due to disruption of
mills supply at some point of the length of political turmoil.
The MPS of June 2014 set 6.5% as the target inflation price
in FY2015. In October 2015, factor to factor inflation came
down to 6.6% and average inflation also got here down to
7.18 percent, primarily driven by means of low non-food
inflation. Though domestic production, in particular that of
rice influences output and price stability, inflation in
Bangladesh is also generally determined via worldwide
expenses in view that the United States has to rely on a
range of fundamental commodities together with
petroleum products. Hence lower expenses of food and oil
at the worldwide market at existing has been a
distinguished component for low inflation rate.
Low petroleum fees also help domestic inflation to be low
seeing that a huge amount is spent on petroleum
merchandise by buyers in Bangladesh. A depressed
gasoline charge additionally affords leverage for the
government to hold home fuel expenditures low which in
turn will provide some respite to consumers, specifically
the low and constant earnings companies who can then
spend their financial savings for other purposes.
Bangladesh depends on RMG exports and remittances
through temporary migrants abroad for high foreign
exchange reserves. If oil rich countries plan to cut down
their apparel imports and reduce employing foreign labor,
it will seriously harm international locations such as
Bangladesh. Thus the country will need to be cautious and
techniques its function to face any such sputtering
situation. Maintaining macroeconomic stability,
increasing effectively in undertaking implementation,
mainly that of the infrastructure and improving
governance is some of these challenges.
While the upcoming year will may not see many changes
in case of these challenges, the financial system is expected
to exhibit a glimmer of hope in terms of greater GDP
increase given the relative financial and political stability.
However, achievement of the focused growth of 7.3
percentages as spelt out in the budget of FY2015 will
require lively efforts for boosting funding through gaining
enterprise self-belief and improved commitments
towards reforms, amongst others.
CONCLUSION
This present study may help the consumers and the policy
makers to know the comparative analysis on oil price both
in the world and Bangladesh and its present & potential
impact over the country’s economy. Despite political
Research Article, ISSN 2304-2613 (Print); ISSN 2305-8730 (Online)
Copyright ©
CC-BY-NC 2014
, Asian Business Consortium |
ABR
Page 47
turmoil, structural constraints, and international
volatility, the Bangladeshi financial system is maintaining
macroeconomic stability and moving forward.
The global recovery, robust home demand growth, and
sustained macro steadiness bode properly for
Bangladesh’s GDP boom and poverty reduction and
Bangladesh comfortably reached middle income status.
Bangladesh was also able to contain inflation due to
favorable international commodity price movements and
sound macroeconomic management. The economy is
getting the benefits of the falling expenses of oil as the
government’s spending on subsidy will go down
substantially and stability of payments will be healthier.
The price of fuel oil has come down to a half in the last one
year but the government is selling the oil at the old price.
The price of the fuel oil is now third highest in Bangladesh
around the world. Energy analysts found two fold reasons
for the sharp fall of world oil price such as weak demand
in many countries due to insipid economic growth, and
shale oil production surging US production. While
Bangladesh is in the process of rationalizing oil expenses
via phasing out subsidies and hiking its expenditures
commensurate with the global price, a subdued world
petroleum market would mean lesser subsidy
requirement. Savings from decrease subsidies ought to
otherwise be used for infrastructure development and
social protection. A depressed gasoline fee also provides
leverage for the authorities to maintain domestic gas
prices low which in flip will give some respite to
consumers, specifically the low and constant earnings
businesses who can then spend their financial savings for
other purposes. Low petroleum expenses additionally
help domestic inflation to be low considering the fact that
a considerable amount is spent on petroleum merchandise
by means of consumers in Bangladesh. The steady fall in
the international market for over a year has made it clear
that oil prices in Bangladesh will drop after adjustment.
Besides, the government is saving money from its budget.
In the last 2014-15 fiscal, the subsidy to the sector
amounted to a total of Tk 2,400 crore. But the expenditure
was only Tk 700 crore as subsidy, suggesting that the
government is making profit from all sides thanks to the
fall of oil price in the international market whereas the
consumers cannot save a single penny.
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