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Aziz hints at further hike in fuel prices

Oil hits $126 on international markets

Star Report
Finance Adviser Mirza Azizul Islam yesterday said that there is no alternative to raising fuel prices as the price of petroleum products have skyrocketed on the international market.
The government, however, is yet to decide as to when and how much the prices would be increased.
"We will have ,10 go for price adjustment at some point or the other...it can't go on like this for long," Mirza Aziz said while talking to the reporters at the Zia International Airport.
He returned home yesterday after attending the annual meetings of United Nations Economic and Social Commission for Asia and the Pacific (Unescap) and the Asian Development Bank (ADB).
The oil price hit $126 per barrel on the international market on Friday.
"We will try to adjust the fuel prices in a manner so that less people are affected by this," Mirza
Aziz said adding that they are considering protection measures for the low-income people.
It would also be kept in mind that the agriculture sector does not suffer due to the hike, the finance adviser added.
Mirza Aziz said that the soaring prices of petroleum products on international market have been putting pressures on the budget, adding that it is not possible to continue providing huge subsidy in petroleum products for a long period.
The adviser, however, said that subsidies on fuel would continue even after the adjustment of the prices.
"We can't increase fuel prices in the same manner as it is now on the international market. So we will have to continue the subsidy in the next fiscal, "he said.
Fuel prices were last adjusted in April 2007 when per barrel oil was S67 on the international market.
Energy Ministry sources said the Bangladesh Petroleum Corporation (BPC) is going to incur an estimated loss of about Tk 7,000 crore in the current fiscal year due to under pricing of petroleum products.
The BPC has already got a loan ofTk 1,700 crore from the finance division in the current fiscal year and recently it has sought Tk 1,800 crore more.
UNB adds: Finance Adviser Mirza Azizul Islam said the tax policy would be made as businessfriendly as possible in the next budget and there would be no hike in tax rates.
"We're examining how the tax policy could be made business-friendly," he told reporters at Zia International Airport.
The adviser was asked about the budget policy for the next fiscal year as the government has completed pre-budget consultations with stakeholders concerned and cross-section of the society.
Mirza Aziz said the main demands from the stakeholders were either to reduce the tax or to increase it. “The tax coverage is going to be widened in the budget for 2008-09, but the tax rates would not be increased. Instead, the tax rates may be reduced in few cases.”
The finance adviser said that he had pointed out the possibility of social discontent over the oil price at the Unescap annual meeting in Bangkok on April 28.
During the Unescap meeting, he had called for initiatives by the international community to help Bangladesh face the increased pressure on the budget due to the price hike of fuel, food and fertiliser as well as increased import costs, he said.
He had also urged the oilsurplus countries to provide financial assistance to the net oil-importing countries like Bangladesh from the extra-profit they made from the increased oil prices.
“The climate change has caused the food crisis where Bangladesh has no contribution, but it has become the worst victim of it," he had said, urging the developed countries to take initiatives to offset the losses.
The adviser said the ADB has already undertaken some positive steps in this regard and pledged for an additional assistance of $40 million to Bangladesh in the wake of increased food prices.
To face the food crisis, the ADB also indicated that they would develop a $500 million fund, but the modalities have not been finalised yet, Mirza Aziz said, adding that Bangladesh would have a better access to the fund. OIL PRICES BREAK S126 Oil prices briefly surged to a record high above 126 dollars on Friday, driven into uncharted territory by speculators trying to take advantage of global supply concerns, reports AFP from New York, quoting analysts.
Oil prices have rocketed to
fresh record highs every day this week In reaction to unrest in key producer Nigeria and other ongoing supply worries.
New York's main oil futures contract, light sweet crude for June delivery, spiked as high as 126.25 dollars in intra day trading before closing at 125.96 dollars, marking a sharp gain of 2.27 dollars from Thursday s closing value.
In London, Brent crude oil briefly hit an all-time peak of 125.90 dollars. The contract subsequently settled up a strong 2.56dollarsat 125.40 dollars.
Sucden analyst Michael Davies said there was "keen interest in the oil market by the (investment) funds, which are currently being attracted by oil's rapid price appreciation this year.
"This probably explains the move higher over the last few days," he said.
World oil prices have rocketed 25 percent since the start of 2008 and have doubled in the past 12 months from around 62 dollars.
Oil values vaulted above the psychological 100-dollar mark in January and have since jumped above 120 dollars. Analysts said the price spikes can also be attributed to rising energy demand from Asian powerhouse economies China and India and the weak US dollar.
Unrest and militant attacks targeting oil company infrastructure in Nigeria, Africa's largest crude producer, have also contributed to the price spikes, analyst say.
Prices continued to bolt higher on Thursday after the Opec cartel insisted the market was well-supplied and driven by speculators rather than by underlyingdemand.
Opec Secretary General Abdalla Salem El-Badri said Thursday that there was no shortage of crude, brushing aside US calls for higher output to dampen runaway prices.
"There is clearly no shortage of oil in the market," El-Badri said in a statement.
The 13-member Organisation of the Petroleum Exporting Countries produces about 40 percent of the world's oil, with current output at about 32 million barrels per day.
El-Badri also maintained □pec's stance tnat oil market volatility has been driven by financial market developments and the increased dabbling by speculative investment funds in the oil market.
"The turmoil in some global equity markets and the considerable depreciation in the US dollar have encouraged investors to seek better returns in commodities, particularly in the crude oil futures market. This has driven prices higher," he said.
The weak dollar has boosted demand for dollar-priced commodities, such as oil, because it encourages demand from foreign buyers.