Governments that try to hold back the tide of global commodity prices usually end up paying more than necessary. Bangladesh has now learned this lesson for the second time in four years, and the price is steep.
Late on Saturday, the energy ministry announced the increase of fuel prices to record levels. Across the four fuel types, including octane and petrol, the average increase was roughly 16 percent. It was also the first mid-month adjustment since Bangladesh introduced its automatic monthly pricing mechanism in February 2024—a reform pushed by the International Monetary Fund and the World Bank, designed precisely to prevent politically driven price suppression. In lockstep, the energy regulator also raised liquefied petroleum gas prices, adding another shock in a single week.
The increase was seemingly inevitable. The Strait of Hormuz continues to be effectively shut amid the protracted Middle East conflict. Brent crude, which began the year at $61 a barrel, surged to $118 by the end of March. Iraq, Saudi Arabia, and the UAE shut production, while several suppliers invoked force majeure. Bangladesh, which imports nearly all of its refined petroleum, saw its import bill expand by the week. The government chose to absorb the shock through subsidies rather than passing it on immediately. An additional $3 billion is estimated in subsidy requirements for the March-June period, mostly for fuel and fertiliser. Bangladesh is now seeking $2 billion in external support to cushion its exposure to volatile fuel markets.
The timing of the latest price hike makes it worse. On Friday, the day before the gazette notification, Brent crude fell 9 percent to below $90 a barrel after Iran announced that the Strait of Hormuz was “fully open” to commercial traffic, before closing it again. But prices are forecast to fall further, with Brent expected to drop below $90 in the fourth quarter of 2026 and average $76 in 2027. But the government opted for a politically painful correction at precisely the moment global prices began to reverse.
The consequences will be uneven and largely negative in the near term. Transport and logistics costs will pass through quickly, pushing up freight charges across the economy. In northern Bangladesh, where the Boro paddy season drives the country’s largest rice harvest, irrigation depends heavily on diesel; higher fuel costs will squeeze farmers directly unless offset by policy support. Price effects will push already elevated inflation higher still.
The opposition has already called the hike “very unfortunate.” It is, but not for the reasons they suggest. The unfortunate part is not that prices rose. It is that they had to rise this far, and this fast, because the government waited until it had no choice. Every month of subsidised delay shifted the burden from the present to the future, from the exchequer to the consumer, and from a manageable adjustment to a record-breaking shock. That is a failure of policy design, not of circumstance. Bangladesh cannot control the Strait of Hormuz, but it can control whether its pricing mechanism is strong enough to function when tested. On this occasion, it was not.