Energy Import Commitments Expand as Higher Global Prices Lift Dollar Demand

The value of letters of credit opened for petroleum and related products has increased substantially in the first quarter of the current fiscal year, underscoring the pressure that elevated international energy prices are placing on Bangladesh's external accounts. Between July and September, LCs for these items totalled roughly $3.7 billion, about 63 percent higher than the $2.28 billion recorded in the same period a year earlier.

Crude-oil commitments accounted for a large part of the rise. Openings for crude oil alone reached approximately $630 million, nearly three times the level seen in the corresponding quarter of the previous fiscal year. Refined fuels and other petroleum products also contributed to the overall expansion, as importers secured supplies against a backdrop of volatile and higher global benchmarks.

International price movements provide the clearest explanation. Average Brent crude prices during July–September exceeded $97 a barrel, more than 40 percent above the roughly $69 average of the same months a year before. Asian LNG reference prices likewise moved higher. Both trends have been linked to persistent geopolitical tensions in the Middle East, which have kept supply uncertainties elevated and prevented a sustained decline in energy costs.

For Bangladesh the higher prices mean that comparable physical volumes now require significantly larger dollar outlays. The expanded LC figures therefore add directly to foreign-exchange demand at a moment when the central bank has already sold dollars from reserves to moderate pressure on the taka. They also contribute to a wider merchandise trade deficit in the early months of the fiscal year, as the increase in import payments has outpaced growth in export receipts.

Fiscal implications are equally notable. Elevated global prices raise the cost of meeting domestic fuel and power needs, increasing the subsidy burden required to limit the pass-through to local consumers and industries. Authorities have already indicated that the country has absorbed several billion dollars in additional energy-related expenditure. Further rises in international prices would intensify that pressure, while any sustained easing would gradually ease both the import bill and the subsidy requirement.

The fuel-related surge sits within a broader increase in import activity. Merchandise imports overall grew by more than 12 percent year-on-year in July and August, with energy items among the fastest-growing categories. Strong remittance inflows have so far helped offset part of the additional dollar demand and kept usable reserves at levels sufficient to cover several months of imports. Even so, the concentration of the increase in a single, price-sensitive category keeps external balances under close scrutiny.

The path of these commitments over the remainder of the fiscal year will depend primarily on the trajectory of global oil and gas prices. Continued Middle East tensions could push costs higher still, while a durable moderation would reduce the dollar requirement for any given volume of supplies. In the interim, the first-quarter data highlight how sensitive Bangladesh's import demand, reserve management, and fiscal position remain to movements in international energy markets. Energy costs are therefore likely to stay a central factor in external-sector dynamics and inflation outcomes through the rest of FY2026-27.