War-Driven Oil Price Surge Pushes BPC to Seek Tk 18,699 Crore Subsidy

The sharp rise in global oil prices triggered by escalating geopolitical tensions has placed the Bangladesh Petroleum Corporation (BPC) under severe financial pressure, prompting the government to seek a subsidy of more than Tk 18,699 crore to offset losses incurred over the four-month period from March to June.

According to the Ministry of Power, Energy and Mineral Resources, BPC—the country’s state-owned agency responsible for importing, storing, marketing, and distributing petroleum products—has suffered heavy losses as international fuel prices, freight charges, insurance premiums, and shipping costs surged while domestic fuel prices were not increased at the same pace.

The ministry has formally requested the Ministry of Finance to provide Tk 18,699.31 crore in subsidies to compensate for BPC’s losses and ensure uninterrupted fuel supplies across the country.

Officials said the recent conflict involving Iran, the United States, and Israel significantly disrupted the global energy market. Increased security risks in the Strait of Hormuz pushed up crude oil prices as well as transportation and war-risk insurance costs, directly affecting Bangladesh, which depends heavily on imported fuel from the Middle East.

BPC estimates that the average import price of diesel rose from around US$86 per barrel before the conflict to nearly US$120 per barrel in June. During the same period, octane prices increased from US$73 to US$104 per barrel. Although prices eased slightly at the end of June, renewed geopolitical tensions in July caused another upward trend.

According to the ministry’s letter dated July 28, BPC incurred losses of Tk 2,248 crore in March, Tk 7,866 crore in April, Tk 2,621 crore in May, and Tk 5,963 crore in June, bringing the total four-month loss to Tk 18,699.31 crore.

Earlier, BPC had warned that it was importing diesel at Tk 203.84 per litre while selling it domestically at Tk 100, resulting in a loss of Tk 103.84 per litre. Octane was being sold at Tk 120 per litre despite an import cost of Tk 151.61, creating a loss of Tk 31.61 per litre. The corporation had estimated that total losses could exceed Tk 30,561 crore if domestic prices remained unchanged. The government later increased fuel prices on April 19.

Despite the price adjustment, continued volatility in the international market has kept BPC under financial strain. The government has therefore opted to absorb part of the burden through subsidies instead of passing the full cost on to consumers.

The ministry noted that the subsidy is essential to maintain fuel supply stability while protecting consumers from the full impact of higher international prices.

Despite the recent losses, BPC has remained financially strong in recent years. In the 2024-25 fiscal year, the corporation recorded a net profit of Tk 4,216 crore, up from Tk 3,943 crore in the previous fiscal year.

During FY2024-25, BPC imported 6.22 million tonnes of petroleum products at a total cost of Tk 50,195 crore, including 1.51 million tonnes of crude oil worth Tk 10,503 crore and 4.70 million tonnes of refined petroleum products costing Tk 39,692 crore.

BPC General Manager (Finance) Muhammad Morshed Hossain Azad said the subsidy proposal has already been submitted to the Ministry of Finance, but no response has yet been received. He expressed hope that the government would approve the request soon.

He also noted that before the latest conflict, BPC had contributed nearly Tk 71,000 crore to the government in taxes and VAT after adopting an automatic fuel pricing mechanism. In addition, the corporation deposited around Tk 11,500 crore into a government fund while investing a significant portion of its profits in future energy infrastructure and supply security.

Energy analysts warn that if global oil market volatility persists, Bangladesh may face rising import costs, higher subsidy requirements, and increasing pressure on the country’s fiscal position and energy security.