Record fuel bill deepens energy strain

Bangladesh’s fuel import bill more than doubled to a record $10.63 billion in the 2025-26 fiscal year, deepening pressure on the country’s energy security as declining domestic gas production forces greater reliance on costly LNG imports.

According to Bangladesh Bank data, the country spent $10.635 billion, equivalent to around Tk 1,31,661 crore, on crude petroleum and petroleum, oil and lubricant (POL) imports in FY2025-26, up 107 per cent from $5.14 billion a year earlier. Fuel imports accounted for 14.13 per cent of the country’s total $75.24 billion import bill.

The latest figure is the highest on record, surpassing the previous peak of $8.98 billion in FY2020-21.

The surge was driven by higher international prices, geopolitical tensions and rising domestic demand.

Energy expert Professor M Tamim attributed the increase mainly to higher prices and demand, warning that the import bill could rise further if global oil prices remain elevated.

Refined fuel accounted for most of the increase. Crude petroleum imports cost around $1.20 billion, up about 92 per cent, while refined POL products cost $9.44 billion, an increase of more than 109 per cent from the previous fiscal year.

The increase was also driven by higher import volumes. Bangladesh imported around 5.74 million tonnes of fuel between July and March, compared with roughly 5.05 million tonnes during the same period a year earlier. The Bangladesh Petroleum Corporation estimated total fuel demand at around 7.4 million tonnes for the fiscal year.

The pressure was particularly acute in June, when fuel imports cost around $1.6 billion, compared with an average monthly bill of about $886 million during the fiscal year.

At the same time, Bangladesh is spending heavily to bridge the widening gap between domestic gas production and demand.

Petrobangla planned to import LNG worth roughly Tk 550 billion in FY2025-26, with a significant portion sourced from the more expensive spot market. Long-term LNG contracts generally cost around $9-$11 per MMBtu, while spot-market cargoes were projected at around $14 per MMBtu. A recent Aramco cargo cost $11.88 per MMBtu.

Petrobangla's procurement plan included 115 LNG cargoes for the fiscal year. Of these, 40 were to come from QatarEnergy under long-term contracts and 16 from Oman, while additional cargoes were being sourced through new long-term, short-term and spot arrangements. The 33 spot-market cargoes alone were projected to cost about Tk 181.85 billion.

The government has also approved the procurement of LNG from US-based suppliers. Under one long-term arrangement, 117 cargoes are to be purchased from Gunvor USA LLC through 2038, with prices linked to the Japan Korea Marker and Henry Hub benchmarks.

The rising energy bill is also adding to wider economic pressures.

Inflation rose to 9.13 per cent in February from 8.58 per cent in January, while food inflation reached 9.30 per cent. Wage growth of 8.06 per cent remained below inflation, reducing real purchasing power, particularly among lower-income households.

Revenue collection in February stood at around Tk 30,559 crore, well below the revised target of Tk 42,051 crore, while development spending slowed amid delays in project approvals, procurement and disbursement.

Higher fuel import costs are also putting pressure on the balance of payments, despite stronger remittance inflows and improved foreign exchange reserves.

The South Asian Network on Economic Modeling estimated that a 40 per cent rise in crude oil prices combined with a 50 per cent increase in LNG prices could reduce Bangladesh's real GDP by around 1.2 per cent and exports by 2 per cent, while consumer prices could rise by almost 4 per cent and real wages fall by around 1 per cent.

The record fuel bill comes as Bangladesh's foreign exchange position has improved, partly due to stronger remittances. Gross foreign exchange reserves were reported at more than $37 billion, while reserves calculated under the IMF's BPM6 methodology exceeded $32 billion. The taka-dollar exchange rate remained relatively stable at Tk 122-124, supported by stronger remittances and improved dollar liquidity in banks.

Analysts, however, warn that remittances alone cannot sustain the stability. Higher exports, stronger investment and other durable sources of foreign exchange will be needed to absorb rising energy import costs.

The record fuel bill has highlighted the structural pressures facing Bangladesh's energy sector, with declining domestic gas production, rising LNG dependence, growing fuel demand and exposure to geopolitical shocks all adding to the strain.

Experts have called for faster domestic gas exploration, larger strategic fuel reserves, a better balance between long-term LNG contracts and spot purchases, adequate LNG storage and terminal infrastructure, greater energy efficiency, faster renewable-energy investment and a clear long-term energy strategy.