The historic drop in oil prices came as a blessing for the people in all the oil importing countries except Bangladesh.
The oil prices began to fall in the international market in June 2014, but the Bangladesh government slightly cut the fuel prices in April last year following demands from economists and businesses.
After that, a number of ministers, including Finance Minister AMA Muhith, on several occasions had said the prices would be lowered further.
However, Nasrul Hamid, state minister for power and energy, yesterday said the government was not slashing fuel prices as those were showing upward trend in the global market.
“We had planned to reduce fuel prices in two phases. But that is not happening as the oil price is showing upward trend in the global market,” he told reporters at the secretariat.
The state minister referred to a World Bank forecast which says the oil price would continue to show upward trend in the next one year.
Muhith, however, said a final decision has not been taken yet.
In April last, Bangladesh cut the prices of octane and petrol by Tk 10 a litre and diesel and kerosene by Tk 3, with the intention of passing on the benefits of low prices in the international market to consumers.
At that time, the government had said the cut was part of a government plan to reduce the fuel prices in phases.
But the government drew criticism as the reduction in fuel oil prices left no impact on local market as well as on the cost of living as it did not lower the transport fares or electricity prices.
Experts said Bangladesh has not benefited from the low oil prices in the international market.
If the prices were cut significantly, it would have positive impact on inflation as well as reduced transport costs, working as a blessing for the people.
The most direct benefit of a significant cut would have gone to farmers who use diesel run pumps to irrigate their crops as well as power plants.
The low oil prices also reduce costs for businesses that use oil products.
Besides, the government is losing a golden opportunity by not bringing in necessary policy reforms in the power sector and linking the local market with the international market, said Zahid Hussain, lead economist of the World Bank in Dhaka.
“Had we linked the local prices with the international market, we would not have to increase the prices at least at this moment,” he said.
He said the current prices were set when the oil price was above $100 a barrel. Although the price is showing upward trend it is unlikely that it would go over $60 a barrel very soon.
India, Sri Lanka and Pakistan have adjusted their prices constantly to reflect the global market.
In November, the issue of fuel price cut was discussed at a meeting of the Fiscal Coordination Committee, which favoured another cut. Accordingly, the reduction was scheduled for December.
In December, Muhith had said the government may lower the prices of fuel oil by a “small margin” in January.
He, however, added: “Prices of fuel oil increased in the international market this December. So, the rate of reduction will not be much.”
Despite the April cuts, Bangladesh Petroleum Corporation still makes profit of Tk 23 to Tk 28 for per litre of petrol and octane and about Tk 16 for diesel and kerosene.
Thanks to the low oil prices in the international markets, the BPC started to make profits in 2015, which came after 14 years of continuing losses.
The state-run agency made a profit of Tk 4,126 crore in 2014-15. The profits rose to about Tk 7,500 crore in 2015-16.
In January last year, the Centre for Policy Dialogue, a think-tank, said a 10-percent cut in petroleum prices would lead to a rise in both the gross domestic product and private investment by about 0.3 percent.
The think-tank, in this January, said inflation would come down by 0.2 percentage points. Export, on the other hand, may increase 0.4 percent.
It said households are likely to be benefitted, with a 0.6 percent rise in consumption on an average, while firms' income may increase by the same margin. Consumption of households in rural areas is expected to increase by 0.7 percent.
This economy-wide impact assessment implies that there is a case for revising downward the fuel prices, the CPD said. However, the government savings may deplete 0.4 percentage points.
In October, the World Bank raised its 2017 forecast for crude oil prices to $55 per barrel from $53 per barrel as members of the Organization of the Petroleum Exporting Countries prepare to limit production after a long period of unrestrained output.
The International Monetary Fund also expects the average oil price to grow by 19.9 percent in 2017 in comparison with the average indicator of 2016, according to a report of Russian news agency TASS on Monday.
The assumed oil price based on futures markets, as of December 6, 2016, is $51.2 per barrel in 2017 and $53.1 in 2018.