Record fuel price hike portends tough times ahead

It’s already a common knowledge that the war in Europe has triggered a fuel, energy shortage, triggering high inflation across the world and while people in Bangladesh were expecting price rise in fuel, the declaration of the spike came as a jolt because the increase has broken all previous records. A TBP report states that the spike has been as much as 52 percent resulting in a nationwide rush for the fuel stations to get as much as possible before the new rates set in.

Reportedly, the news provoked chaotic scenes as many stations suspended sales while others tried to exploit the declaration by instantly jettisoning the previous rates.

Protests followed but the scene on the eve of the price rise is just the beginning. More woes are on the way because the price hike of diesel, a fuel used extensively in the agriculture sector for running pumps and generators, will come as a blow for farmers. The rationale given for the sudden rise is the impact of the Ukraine War although global price of fuel hasn’t shown any upward trend recently.

Be that as it may, the war is having the contagion impact because soon after the conflict began, there were strident calls from the highest authority to stringently follow austerity measures, Bangladesh has been contending with regular power cuts, a volatile currency market that saw an abnormal rise in the exchange rate of the USD plus high inflation.

In addition to this, the government is believed to have asked for a $ 4.5 billion from the IMF.

The war raging in Europe has already caused severe disruptions to the supply chain and since tourism has been hit hard, island economies, like the one in Sri Lanka, which relied a lot on tourism income, have come to the edge of a precipice.

Now Bangladesh may not be in the condition of Sri Lanka but there cannot be any room for complacency because the major foreign currency earning for the country is through RMG export, which may see dwindling orders since major buying regions, Europe and USA, are grappling with an impending recession.

In times of hardship, people will cling on to cash and reduce consumer spending that will inevitably impact orders, thereby leaving our RMG industry in doldrums.

The latest move to hike fuel prices may see a decline in the number of vehicles on Dhaka streets, easing congestion, but this comfort is a double edged sword because the price rise will see transport expenses rise.

Naturally, for millions of professionals who will not see an increase in their income, this is an extra burden. Transport owners will face the ire of the commuters if they raise the fair but if they maintain the previous rates, their businesses will won’t be viable for too long.

However, despite hardships, the undeniable fact is that the war in Europe is manifesting itself in the most unpalatable of ways. Since major powers are polarized, a global consensus seems illusory at the moment. Arguably, the best course of action is to adopt austerity in all spheres of life. The government can consider a special rate for diesel for the sole use in the agro sector. Naturally, if such a provision is approved, unscrupulous elements may try to take advantage of it but with due vigilance this can minimize the expenses of the farmers.

One possible approach can be to permit distribution of fuel for agriculture under the supervision of the defence forces.

The fuel price hike is something we have to live with along with the sobering situation of inflation, energy shortage plus caprices of the Dollar exchange rates.