Crude oil prices on the global market are not currently at their highest level in history. Yet the prices of all four types of fuel sold in Bangladesh — diesel, kerosene, petrol and octane — have reached their highest levels ever. Amid the Middle East conflict and supply shortages, the price of international benchmark Brent crude rose to around $110 a barrel at its peak this month. But that remains well below the record price reached in April this year and the 2008 record.
During previous major global oil crises, fuel prices in Bangladesh were significantly adjusted after international prices reached record or near-record levels. This time, the government has raised the prices of all four types of fuel by BDT 20 per litre even though global prices have not reached those levels. Following three price adjustments this year, diesel has risen by a total of BDT 35 per litre, kerosene by BDT 43, petrol by BDT 44 and octane by BDT 45. Compared with prices before April, these fuels now cost around 35 to 38 percent more.
Under the government’s latest decision, which took effect on Monday, the diesel price rose from BDT 115 to BDT 135 per litre, kerosene from BDT 135 to BDT 155, petrol from BDT 140 to BDT 160 and octane from BDT 145 to BDT 165. In percentage terms, diesel prices rose by 17.4 percent, kerosene by 14.8 percent, petrol by 14.3 percent and octane by 13.8 percent.
When the price increases took effect in Bangladesh, crude oil prices on the international market were not at their historical peak. Brent crude rose to around $110 a barrel in the middle of this month following an attack on Saudi Arabia’s East-West Pipeline and renewed concerns over supply from the Middle East. But the price fell back to $104 on September 18, and by around 9 pm yesterday, Brent crude was trading at $99 a barrel. Although crude oil prices on the international market were not at record highs, the prices of diesel, kerosene, petrol and octane were increased in Bangladesh. The retail prices of all four products have consequently reached their highest levels in the country’s history.
CPD Executive Director Dr Nazneen Ahmed told Bonik Barta, “Fuel prices on the international market aren’t currently at the peak levels seen in 2008 or 2022. But the decision to increase the prices of all four types of fuel by BDT 20 per litre can’t be explained fully by international market prices alone. Bangladesh Petroleum Corporation’s financial pressures and the government’s subsidy management are also important factors here. But in my view, a more measured and targeted approach could have been taken instead of raising the prices of all types of fuel by the same amount at once.”
Noting that diesel affects almost every sector of Bangladesh’s economy, she added: “Diesel accounts for around 64 percent of total petroleum product consumption in the country. A large share of it is used in transport, agriculture and other productive activities. Consequently, a roughly 17.4 percent increase in the diesel price won’t be limited to transport fares; it could spread across the entire economy through agricultural production, goods transportation, and industrial production and marketing costs.”
She further added, “For the time being, diesel and kerosene prices could have been kept unchanged while making a comparatively larger adjustment to petrol and octane prices. If there was a need to reduce subsidies, that could also have been done gradually. It was also necessary to consider whether the existing tax and duty structure on fuel could be temporarily rationalised.”
The situation in the international market was even more critical five months ago. After the Iran war and disruptions to fuel oil shipments through the Strait of Hormuz, the price of immediately deliverable Brent crude rose to a record $144.42 a barrel. Brent futures also climbed to as high as $126 a barrel that month, meaning the high prices seen in the global market in September remain well below the record prices reached in April.
The Ministry of Power, Energy and Mineral Resources, however, has defended the price increase, saying that despite fuel prices on the international market having more than doubled, domestic prices had not been raised for so long in the public interest, adding that the relatively low fuel prices in Bangladesh had created a risk of smuggling to neighbouring countries. Against this backdrop, prices were adjusted to prevent fuel smuggling, save foreign currency and reduce losses incurred by Bangladesh Petroleum Corporation (BPC).
When oil prices reached a record high on the global market in April this year, diesel was selling for BDT 100 per litre in Bangladesh, while kerosene, petrol and octane were priced at BDT 112, BDT 116 and BDT 120 respectively. Despite record prices on the international market, the government kept domestic fuel prices unchanged at the time, but it later announced a price increase on April 18. From April 19, the price of diesel was raised from BDT 100 to BDT 115 per litre, kerosene from BDT 112 to BDT 130, petrol from BDT 116 to BDT 135 and octane from BDT 120 to BDT 140.
Even after oil prices reached record levels on the international market, domestic prices were increased by BDT 15–20 per litre in April, depending on the product. Brent crude, in contrast, rose to around $110 a barrel in the middle of this month before falling to around $100. The prices of diesel, kerosene, petrol and octane were raised by BDT 20 per litre each while global prices remained well below their April peak. Stakeholders believe the magnitude of the domestic price increase is relatively high even though oil prices have not reached record levels on the international market.
Oil prices fell rapidly after reaching a record in the first week of April on the international market. On April 17, the price of Brent crude for future delivery fell to around $90 a barrel. The government then made a second price adjustment in June. While the price of diesel was kept unchanged at BDT 115 per litre, the prices of kerosene, petrol and octane were each increased by another BDT 5. Kerosene consequently rose to BDT 135, petrol to BDT 140 and octane to BDT 145 per litre. The government said at the time that the adjustment had been made in line with conditions in the international fuel market. The prices remained unchanged in July and August.
In September, the government raised the prices of all four types of fuel for the third time this year. Consequently, diesel, which was priced at BDT 100 per litre when global fuel prices reached a record high in April, now costs BDT 135. Kerosene has risen from BDT 112 to BDT 155, petrol from BDT 116 to BDT 160 and octane from BDT 120 to BDT 165. In other words, compared with prices before April, diesel is now BDT 35 more expensive per litre, kerosene BDT 43 more, petrol BDT 44 more and octane BDT 45 more.
Shafiqul Alam, lead energy analyst for Bangladesh at the Institute for Energy Economics and Financial Analysis (IEEFA), told Bonik Barta, “The government could have avoided such a sharp increase in prices all at once. The large one-off increase has raised transport costs, which will directly affect the cost of producing and supplying goods. Its overall impact could push inflation even higher and intensify pressure on people’s lives.”
Noting that the government had the opportunity to adjust domestic prices regularly in line with international market movements, he said, “Instead of keeping prices unchanged for a long period and then raising them sharply, small adjustments could have been made every month. That would have prevented such a sudden shock to the economy.”
Earlier, after the Russia-Ukraine war began in 2022, the price of Brent crude reached $139.13 a barrel on March 7, its highest level since 2008. At the time, diesel and kerosene were priced at BDT 80 per litre in Bangladesh, while petrol and octane cost BDT 86 and BDT 89, respectively.
Five months after oil prices reached their peak, Bangladesh raised fuel prices in a single adjustment on August 6, 2022, by the highest rate in the country’s history. The price of diesel and kerosene was increased from BDT 80 to BDT 114 per litre, petrol from BDT 86 to BDT 130 and octane from BDT 89 to BDT 135. Diesel and kerosene prices rose by 42.5 percent at once, while petrol increased by 51.1 percent and octane by 51.7 percent. This remains the highest one-off increase in fuel prices in the country’s history.
After the record price increase, then State Minister for Power, Energy and Mineral Resources Nasrul Hamid said the government had refrained from raising prices even when the international price of refined diesel had risen to around $170 a barrel at one point. In the hope that the situation would normalise, Bangladesh Petroleum Corporation (BPC) incurred losses of more than BDT 80 billion from its own funds. The depreciation of the taka against the dollar also increased import costs. He said the government was ultimately forced to raise prices because BPC was at risk of exhausting its funds.
He identified the rise in the dollar exchange rate, alongside high international prices, as a major factor. The government had waited for the situation to return to normal, but the subsequent rise in the dollar exchange rate created the risk of further losses for BPC, he said. At the time, there were also proposals to reduce taxes and VAT to ease the pressure. But instead of taking that route, the government ultimately decided to raise retail fuel prices.
During the major fuel price increase in 2022, the rapid depreciation of the taka against the US dollar, alongside high international oil prices, also increased import costs. According to Bangladesh Bank data, the interbank dollar exchange rate was BDT 86.20 on April 25, 2022. By September 15, it had risen to BDT 102.07, meaning the taka had depreciated by around 15.6 percent in less than five months. BPC consequently had to spend more taka to import the same volume of fuel, on top of the higher international prices.
Bangladesh now operates under a market-based exchange-rate regime, and the dollar exchange rate has also remained relatively stable in recent times. The country is not currently facing the kind of rapid currency depreciation seen in 2022.
Besides international oil prices and the dollar exchange rate, several other costs are incorporated into retail fuel prices in Bangladesh. Under the automatic pricing mechanism, import duties, advance income tax and VAT are added to the international product price or import cost. The final price also includes premiums comprising freight, insurance and the supplier’s margin; operating costs such as port unloading, storage, handling, LC commissions and transportation losses; administrative, financial and maintenance costs; BPC’s margin; and domestic transportation and distribution costs.
Various analyses by the Centre for Policy Dialogue (CPD) have raised questions about the transparency and efficiency of Bangladesh’s fuel pricing structure. According to the organisation, besides international market prices and the dollar exchange rate, several components — including various taxes, BPC’s margin, operating costs and transportation and distribution expenses — are added to the final fuel price. Questions have also been raised over how reasonable some of these costs are and how they are determined.
CPD analyses have at various times highlighted the cost of fuel leakage and operational inefficiencies being passed on to consumers, weak oversight of the fuel supply system and the risk of irregularities at the distribution stage. According to the organisation, fuel wastage or leakage during transportation, storage and distribution, as well as other operational inefficiencies, need to be identified and measured separately.
Another major fuel price adjustment in Bangladesh took place in 2008. International crude oil prices had been rising rapidly since June that year. In July, the price of US benchmark West Texas Intermediate (WTI) crude reached an all-time record of $147.27 a barrel, while Brent crude stood at $147.50. Bangladesh made a major price adjustment amid this surge in the international market. At the beginning of July, the price of diesel and kerosene was raised from BDT 40 to BDT 55 per litre, petrol from BDT 65 to BDT 87 and octane from BDT 67 to BDT 90.
Later, as oil prices fell rapidly on the international market, Bangladesh also cut fuel prices in October. Diesel and kerosene were reduced from BDT 55 to BDT 48 per litre, petrol from BDT 87 to BDT 78 and octane from BDT 90 to BDT 80. During previous major price adjustments, international fuel prices were at record or near-record levels. This time, although global prices have not reached such levels, the consumer prices of all four types of fuel in Bangladesh have reached their highest levels in history.
According to the US Consumer Price Index (CPI), after adjusting for inflation, the purchasing power of $142 in 2008 was equivalent to around $217–221 in 2026. Based on the latest CPI calculation for 2026, $142 in 2008 is equivalent to around $221 in today’s money. Brent crude reached a peak of $139.13 a barrel in March 2022. According to the US CPI, that amount is equivalent to around $162 in 2026.
But Anindya Islam Amit, state minister for Power, Energy and Mineral Resources, said there was no alternative to adjusting fuel prices. Speaking to journalists at the Secretariat yesterday, he said, “The government wouldn’t want to take this unpopular decision unless there was no alternative. The Middle East crisis is taking a new turn every day. Oil prices are rising, and shipping costs are increasing. At this point, there was no alternative to adjusting prices.”
The state minister also said the government had incurred losses of BDT 228.75 billion from March to August. Because fuel prices were not adjusted in line with global market prices, the government had to incur losses of BDT 38.13 billion every month, he said. He also expressed concern that continuing subsidies could severely disrupt social security programmes.