From crisis to capability: Rethinking Bangladesh’s energy strategy

Bangladesh, despite inheriting a structurally fragile energy system, has managed the current fuel crisis with a degree of restraint. Compared to several peer economies facing similar global shocks, the government has avoided passing the full burden of price volatility onto citizens.

This reflects a level of macroeconomic discipline and political sensitivity.

But this crisis management, however competent, is not a strategy. Our main issue is structural. Bangladesh's energy system simply isn't built to absorb shocks. It is still too centralised, slow to adapt, and reliant on a limited mix of fuels and supply routes. What we are seeing now—more than a one-off crisis—is the result of years of delayed reforms, weak diversification, and policies that have mostly reacted to problems rather than prevented them. The question now is how to ensure the next crisis does not unfold in the same way.

Three shifts addressing both immediate vulnerabilities and long-term resilience could fundamentally change Bangladesh's energy trajectory.

Fixing the spot market problem

Bangladesh is not absent from global fuel markets. It actively imports LNG and refined fuels. The problem is not participation—it is positioning.

Spot purchasing today operates at the speed of global finance. Prices shift within hours. Cargoes are diverted mid-route. Opportunities appear and disappear in narrow windows. Bangladesh, however, continues to operate through a procurement system built for administrative caution: tenders, committees, and layered approvals. By the time decisions are made, the market has already moved.

This delay comes at a cost. In tight markets, cargoes flow first to buyers who can act fastest and pay most reliably—typically higher-rated economies in Europe and East Asia. Bangladesh, constrained by both credit rating and foreign exchange pressures, often arrives late and pays more.

The solution is not theoretical. It is already in practice elsewhere.

Countries that depend heavily on imported energy are embedding themselves directly within global trading hubs. Singapore, in particular, has emerged as the command centre of Asian energy markets. Japan's energy giant JERA operates a large, Singapore-based trading arm with real-time decision-making authority. This is not about profit maximisation—it is about national energy security.

Bangladesh does not need a 300-person trading floor. But it does need presence and authority.

A small, high-level team from Petrobangla or Bangladesh Petroleum Corporation, stationed in Singapore and empowered to execute spot purchases in real time, could transform how Bangladesh navigates volatile markets. This would require a degree of targeted deregulation—especially during crisis periods—where speed becomes synonymous with savings.

Because in today's energy markets, speed is not a luxury. It is the difference between securing supply at a reasonable price and paying a premium under pressure.

Without this shift, Bangladesh risks becoming captive to traders who capitalise on its delays—turning structural vulnerability into commercial advantage at the country's expense.

Reducing exposure: Biodiesel as a transitional strategy

Diversification usually brings us back to renewables—solar, wind, and others. They matter, but they are slow to scale. The current crisis needs something quicker, something within the existing fuel system. This is where biodiesel comes in. Countries like Indonesia have already moved fast, blending up to 50% biodiesel and saving billions by cutting fuel imports. This shows even partial substitution can make a real difference.

For Bangladesh, this matters because the real pressure point is diesel and crude oil—fuels that power transport, farming, and industry. Reducing diesel use, even a little, could ease import costs and protect foreign reserves.

Unlike renewables, biodiesel offers a gradual path. In the short term, Bangladesh could import it from Malaysia and Indonesia and introduce a modest blend like B10 or B15. That alone could reduce dependence without waiting years for domestic capacity.

Over time, the country could build its own industry using non-edible crops and agricultural byproducts. That is not just energy policy—it is economic policy, creating rural jobs and new value chains. At the same time, it would cut emissions and support climate goals.

This is not about replacing fossil fuels overnight. It is about reducing risk, step by step.

Diversification also means rethinking who Bangladesh depends on. Right now, supply is concentrated and exposed to global shocks. Building steady partnerships with nearby, stable suppliers—like Brunei or Indonesia—could make the system more resilient. In the end, diversification is not just about fuels. It is about building relationships that hold up when the pressure rises.

Building buffers: Learning from Thailand

If Singapore represents speed and Indonesia represents substitution, Thailand offers a lesson in preparedness. Like Bangladesh, Thailand is heavily dependent on energy imports. It maintains petroleum reserves covering approximately 90 to 95 days of consumption, including in-transit supplies. It has pre-approved mechanisms for rapid LNG procurement during emergencies. Its state institutions operate dedicated monitoring systems for energy markets.

Most importantly, Thailand has an Oil Stabilisation Fund—a pre-financed mechanism that allows the government to cushion domestic fuel prices without immediate fiscal strain. Bangladesh, by contrast, has had to rely on ad hoc fiscal adjustments and external borrowing to manage price shocks. Preparedness is not supposed to be built during crises. It should be built in the years when crises are absent.

A strategic petroleum reserve, a pre-funded stabilisation mechanism, and delegated procurement authority are operational tools already functioning in comparable economies.

Countries like Thailand have already spread out their crude oil imports, sourcing a significant share from outside the Middle East. Bangladesh, by contrast, still relies heavily on a narrow set of suppliers—leaving it exposed to geopolitical shocks.

Looking further afield, to regions like West Africa—Angola or Algeria, for instance—could help spread that risk and even bring cost advantages. But this is not just a trade decision. It requires investment in refining infrastructure that can handle different types of crude—something Bangladesh has yet to seriously prioritise.

The choice ahead

Since 2018, Bangladesh has spent billions importing LNG, with the annual bill rising sharply in recent years. This trajectory is not simply a function of demand—it is a reflection of limited alternatives. The current crisis will pass. Another will come.

The real question is whether Bangladesh enters the next crisis with the same weaknesses—or with a system built to hold under pressure.

A procurement presence in Singapore would mean competing in real time, not scrambling after prices spike. A biodiesel blending strategy would steadily cut reliance on imported diesel. And tools like strategic reserves and stabilisation funds would give the government space to act, instead of constantly reacting.

None of these require technological breakthroughs. None depend on external financing alone. What they require is a shift in mindset from managing crises to designing systems that make crises less damaging. Energy security is no longer just about supply. It is about strategy, speed, and resilience. And those are choices Bangladesh still has time to make—before the next blackout forces them.

Ashfaq Zaman is the founder of Dhaka Forum and a strategic international affairs expert.

Disclaimer: The views and opinions expressed in this article are those of the author and do not necessarily reflect the opinions and views of The Business Standard.