Soaring price of oil may put BD in back-foot for years

Bangladesh may get into a long time economic recession, not only that the whole world is going to face the impact of 'military operation' in Ukraine as oil import bill is set to jump to an 'unlimited figure' which may hamper all sorts of development work in countries like Bangladesh, Former Energy Adviser Dr M Tamim said.
"We may get into a long time economic recession, we don't know how long it will last but we apprehend that it will last at least for a year," he said and added that the 2008 recession was a different one, at that time our economy was not effected much but this time we became an energy importing country in the true sense.
The government has to be ready to pay a huge amount for oil import bills as the price of oil soared past US$103 per barrel for the first time in more than seven years on Thursday after the 'military operation' in Ukraine.
Earlier, it was apprehended that the oil price is set to jump 36 per cent this fiscal year thanks to the appreciation of the dollar and an increase in global oil prices, Dr Tamim said.
It may be mentioned here that the import cost of petroleum products stood
"We are working. The army is working," he said. "Don't panic. We are strong. We are ready for everything. We will defeat everyone. Because we are Ukraine." Zelensky also said Russia was carrying out military strikes on Ukrainian infrastructure.
Meanwhile, Zelensky on Thursday broke off Kyiv's diplomatic relations with Moscow in response to Russia's invasion of its Western-backed neighbour. It marked the first rupture in ties since Russia and Ukraine became independent countries after the Soviet Union's collapse in 1991.
"We broke off diplomatic relations with Russia," Zelensky said in a video message. Ukraine and Russia maintained ties throughout a complex history of relations that included two pro-Western revolutions in Kyiv in 2004 and 2014 that the Kremlin strongly opposed.
Analysts said Kyiv was keen to keep diplomatic channels with Moscow open because it needed to provide consular and other assistance to nearly three million Ukrainians living in Russia. Zelensky's decision came hours after Putin launched an all-out offensive that included an air assault and ground invasions along Ukraine's northern and southern frontiers.    -AFP
Sandwiched between Russia and the European Union, Ukraine has been torn between its former Soviet master and the West -- of which it wants to be a part -- since its independence in 1991. Ukraine votes overwhelmingly for independence from the crumbling Soviet Union in a referendum on December 1, 1991. Russian President Boris Yeltsin recognises it the next day and a week later Russia, Ukraine and Belarus sign an accord establishing the Community of Independent States (CIS).
After the USSR finally collapses on December 25, 1991, Ukraine spends the next five years trying to wriggle free of its giant neighbour which has dominated it for three centuries. Kyiv is lukewarm about the CIS, regarding it as a Russian ploy to bring former Soviet republics back into its orbit.
Moscow, Washington and London sign an accord in Budapest on December 5, 1994 to respect Ukraine's independence, its sovereignty and its borders. Russia and Ukraine sign a friendship and cooperation treaty in 1997 but it fails to lift all the ambiguity which overshadows their relations.
The treaty resolves a thorny dispute over the share out of the ex-Soviet Black Sea fleet which is anchored in Sevastopol in Crimea. Russia remains owner of most of the ships, but agrees to pay Ukraine rent to use the port of Sevastopol.
The Kremlin is deeply opposed to Ukraine or any other ex-Soviet republic joining NATO and it is able to hold an economic gun to Ukraine's head. Russia remains Ukraine's most important trading partner, and Kyiv is totally dependent on Russian oil and gas.
In 2004, Ukraine's fraud tainted presidential election is won by Russia-backed candidate Viktor Yanukovych.  But after unprecedented street protests, the election is annulled.  The victory on December 26 of pro-Western opposition leader Viktor Yushchenko marks the beginning of a new political era in Ukraine after a decade under the thumb of Moscow-oriented Leonid Kuchma.
Yushchenko is victim of a mysterious dioxin attack, which disfigures him, during the campaign but survives. From his arrival in power, Yushchenko voices Ukraine's wish to join the EU, despite opposition from Brussels and NATO.
But in 2008 NATO provokes Moscow's ire when its leaders declare that Ukraine might one day join the alliance.  The two neighbours go through several trade wars and stand-offs, the most spectacular being over gas in 2006 and 2009 which disrupts Europe's energy supplies.
President Viktor Yanukovych comes to power in February 2010 and begins a rapid rapprochement with Russia, while saying integration with the EU remains a priority. But under pressure from the Kremlin, he refuses at the last minute to sign an accord with the EU in November and instead goes for a trade deal with Moscow.
The U-turn unleashes a mass pro-European protest movement centred on Kiev's central square, the Maidan. The street revolt ends in February 2014 with Yanukovych's flight to Russia and his impeachment, after the deaths of around a hundred protesters in violent clashes.
Russia riposts by deploying its "polite little green men" in Crimea -- which turn out to be Russian troops -- and then annexing the peninsula. On March 16, 2014 a Moscow-run referendum there approves the Russia takeover. The annexation provokes the worst diplomatic crisis between the West and Russia since the fall of the Soviet Union and heavy sanctions are imposed on Moscow.
Then in April, pro-Russian separatists seize key sites in Donbas, a mostly Russian-speaking industrial region in eastern Ukraine. Clashes degenerate into war in May. Kyiv and the West believe that Moscow has engineered the separatist drive in retaliation for Ukraine's pro-Western slant. Some 14,000 people die in the conflict.
Since late 2021 Moscow has massed tens of thousands of soldiers on Ukraine's borders, fuelling fears of an invasion. On Monday, Russian President Vladimir Putin recognises the independence of the two separatist self-proclaimed republics of Donetsk and Lugansk. Three days later Russian forces invade Ukraine with Putin warning the West of "horrible consequences" if it interferes.    -AFPt $1.04 billion in July-August, up 71 per cent year-on-year in 2021.
Chairman of Bangladesh Petroleum Corporation (BPC) said the latest upward trend of petroleum prices in the global market had not created any major impact for the country yet.
Echoing Dr Tamim's voice, a central banker said the import cost of the item would widen in the coming months as the price was on the rise in the global market every 10 hours from Thursday.
However, on October 8 last year, the price of benchmark Brent crude oil stood at $81.2 per barrel in contrast to $42.8 a year ago.
"If the oil price continues to rise to hit $110 a barrel there's a very real danger," Dr Tamim added.
If prices do get this high it will 'cause untold financial difficulties for many people who depend on their cars for getting to work and running their lives as it would sky rocket as oil is a strategic item, he said.
Consumers are already paying a high price for energy and fuel, with demand surging following the easing of Covid restrictions.
The war threat of a conflagration has fanned concerns over supplies of key commodities including all imported item and import-export, increase energy price like electricity and gas immediately and government has nothing to do here as we don't have any analysis or prediction of our actual energy consumption, Dr Tamim claimed.
The crisis comes as governments struggle to contain runaway inflation fuelled by demand as life returns to normal after recent lockdowns, we may take up a decision to stop all development works, he added.
In fiscal 2018-19, 75 lakh tonnes of oil is set to be imported for $4.85 billion, according to Bangladesh Petroleum Corporation (BPC). The exchange rate hit Tk 83.75 in July, meaning Tk 40,600 crore will have to be spent.
Last fiscal year, BPC spent $3.67 billion for importing 67 lakh tonnes of petroleum products. The average letter of credit rate against the import was Tk 81.30 per dollar and the total cost stood at Tk 29,873 crore.
At the same time, the price of crude oil increased $38.34 per barrel to $81.51 this year and that of diesel by $38.25 per barrel to $88.56, according to BPC.
BPC is incurring losses of Tk 20.97 crore per day due to the hike in oil price in the global market as well as dollar price in the local market, according to one of its reports.
Industry insiders fear the rising import cost may compel the government to hike the oil price. The government had slashed the fuel price back in April 2016 and left it at that rate since.
To combat the two-pronged assault on the oil import bill, BPC has recently requested subsidy of around Tk 10,000 crore for this fiscal year.