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Friday's sharp fall of oil prices in international market amid the fear of a fresh surge in Covid-19 cases in different regions including Europe prompts a reappraisal of global economic recovery. Austria was the first country in Europe to impose a total lockdown this autumn to tackle rise in coronavirus infections. Germany, Europe's largest economy, may follow suit. Russia has been fighting a new wave of coronavirus cases and other European countries are also reporting rising incidents of the virus attacks with the approach of winter.
On Friday oil price fell below $80 a barrel for the first time since September last and the prediction is that in the first months of the year 2022, supply is likely to outpace demand. This is because some of the world's biggest economies are also releasing oil from their strategic petroleum reserve (SPR) on the request from the United States of America (USA). The US West Texas Intermediate (WTI) recorded price slumps to $76.40 for December and $75.83 for January delivery from its highest rise to $82.24 earlier. Both WTI and Brent, major trading benchmarks, are all set for a fourth week of price slump.
The winter does not as yet look ominous but if Covid-19 cases continue to rise even moderately for third, fourth or fifth waves in some of the European countries, turning the region into a hotspot of the disease, economic slumps are on the cards. Their ripple effects will be felt all across the globe. Now how will it impact the market, particularly exports from Bangladesh to its destinations, and the domestic economy here?
The adverse impacts of fuel-oil price hike have been multifarious and multidimensional. Market volatility is so ruthless that both the poor and the middle class are gasping for breath in its stifling grasp. Economic experts across the board are unanimous that raising fuel price was a preposterous decision without taking into consideration the wide-ranging adverse consequences on the economy.
Only after five months of losses, did the Bangladesh Petroleum Corporation (BPC) raise the price of diesel and kerosene by 23 per cent. The fact that the BPC made a hefty profit when fuel price was at its lowest in the international market over the past years has been overlooked conveniently. According to a report, the BPC made a profit of nearly Tk 500 billion during the past seven years because it did not adjust prices of fuel oils with the fall in prices.
Now that the prices are falling steeply, what will the BPC do? Cost escalation for production of a range of manufacturing and consumer goods as also rice, the country's staple, along with transportation fare has made the market jittery. Should the BPC not slash fuel prices now in order to go by its own rationale? If it can go for a raise in prices following their rise in the international market, it is morally bound to bring down the prices with their fall. The sooner it does so the better for all the sectors of economy.
However, there is doubt if the various sectors that have already taken advantage of the fuel price hike will go for measures to curtail it. However, if the administration is serious and sincere, this can be done. For example, with the lowering of fuel oil prices by the BPC to the earlier level, it can compel the transport sector to revert to the previous fair charts. Thus the transportation cost of covered van used for carrying RMG products and raw materials to the port or to their warehouses can be slashed to the previous benchmark. The overall economy of the country will thus benefit from lower prices of fuel oils. Therefore it is incumbent on the authorities concerned to reverse their decision now in order to boost the economy.