Dhaka’s Fuel Import Financing Climbs Sharply as Middle East Conflict Drives Up Costs

Letters of credit opened for petroleum and petroleum-product imports rose 65 percent in the first three months of the current fiscal year, a jump driven almost entirely by higher international prices linked to the conflict in the Middle East rather than by any substantial increase in the volume of fuel entering the country. Bangladesh Bank data indicate that importers arranged financing worth $3.7 billion between July and September of fiscal 2026-27, up from $2.28 billion in the corresponding period a year earlier.

The rise was most striking in crude-oil financing, where the value of letters of credit roughly tripled to around $630 million from a little more than $200 million. Arrangements for other petroleum products, chiefly liquefied natural gas and refined fuels, increased to $2.4 billion from $1.12 billion. Energy specialists emphasise that the physical quantities purchased have remained broadly stable; the larger LC values reflect elevated global prices and additional shipping and insurance premiums. Average Brent crude prices exceeded $97 a barrel during the July-September quarter, more than 40 percent above the roughly $69 recorded a year earlier. Spot-market LNG prices have also climbed sharply, with some cargoes secured near $30 per million British thermal units after a major long-term supplier declared force majeure and later extended the notice into November.

Bangladesh depends heavily on imported energy. It requires more than 6.8 million tonnes of petroleum products each year, with diesel forming the largest share, and meets a significant portion of its gas demand through LNG imports. Disruptions affecting the Strait of Hormuz and higher global freight rates have added further costs, so the overall fuel import bill has expanded even though underlying demand has not grown markedly. Analysts estimate that total energy import expenditure could reach $18–20 billion this year if present price levels persist, compared with roughly $12–13 billion under more normal conditions.

The higher bill is already affecting public finances and domestic prices. Last month the government raised the administered prices of all four major petroleum products by Tk 20 per litre—the largest single adjustment since 2022—in an effort to pass part of the increased cost through to consumers. Subsidy outlays for both oil and LNG are expected to rise further, placing additional pressure on a budget already constrained by limited revenue growth. Economists note that sustained high energy costs will raise factory production expenses, increase transport charges, and feed into broader inflation, potentially discouraging private investment and slowing overall economic activity. Foreign-exchange reserves face extra strain because the country's principal sources of hard currency—garment exports and remittances—must now cover a larger fuel import requirement.

Central-bank figures show that actual settlements of petroleum-related letters of credit rose 26 percent year-on-year in the same quarter, confirming that the higher financing is translating into real foreign-exchange outflows. Officials at the state-owned Bangladesh Petroleum Corporation have indicated that physical supplies remain adequate through the end of the year, yet they acknowledge that prolonged elevated prices will make it harder to maintain comfortable stock levels without further fiscal or external support. Energy analysts have called for accelerated domestic gas exploration, faster deployment of renewable capacity, and measures to improve industrial energy efficiency in order to reduce long-term reliance on imported fuels.

The 65 percent increase in petroleum-related letters of credit therefore offers a clear measure of how external conflict is raising the cost of keeping the Bangladeshi economy supplied with energy. Until global prices moderate or domestic production and efficiency improve, the elevated import bill will continue to weigh on the budget, the external accounts, and the pace of industrial recovery.