The cabinet’s decision to import 1.3m tonnes of crude oil at more than twice the current international rate of $55 a barrel warrants close scrutiny by the parliament.
When transport costs are taken into account, the freight on board cost of these imports is estimated to be around $118 per barrel during the first six months of 2015, and nearly $128 per barrel for the July-December period.
Under this government-to-government contract, the state-owned Bangladesh Petroleum Corporation (BPC) will buy 700,000 tonnes from Saudi Arabia and will import 600,000 tonnes from the UAE at a total cost of $1.13bn.
With the oil scheduled to be shipped as needed and refined at the government-owned Eastern Refinery plant in Chittagong, the question has to be asked why this could not have been sourced at market rates to take advantage of prevailing falls in international prices. The deal does not seem long-term enough to act as a hedge against future price rises.
It is costly enough that scarce taxpayer funds are wasted on subsidising fossil fuel use in an imprudent and environmentally-unsustainable manner. There is never any justification for spending public money in an imprudent fashion.
This applies equally to funds spent on importing oil in the first place. When economies around the world are hoping to use lower oil prices as a boost for manufacturers, it beggars belief why the government should be paying so far over the odds.
If the root cause of this is systemic, the government needs to reform its approach and buck up its bargaining power.
