Energy security cannot rest on hope
With geopolitical tensions escalating in the Middle East and strategic chokepoints under threat, Bangladesh can no longer rely on economic forces alone to dictate energy prices. The country must urgently shift from reactive crisis management to proactive resilience building
Bangladesh should read the latest Middle East escalation with clarity and urgency. For a brief period, there was an assumption, perhaps even a hope, that energy infrastructure would remain a red line. That assumption is now fragile.
In my recent interactions with international media, including Reuters and S&P Global, I emphasised a simple but uncomfortable truth: energy markets today are no longer driven by economics alone; they are being repriced by geopolitics. Risk premiums are back. Supply chains are no longer neutral. And chokepoints like the Strait of Hormuz have become strategic fault lines, even the Red Sea.
This matters deeply for Bangladesh. Nearly 90% of our LNG fuel imports transit through Hormuz. Globally, about 20% of LNG trade passes through this narrow corridor, much of it destined for Asia. Any disruption – whether physical or even perceived – immediately tightens supply and drives price volatility.
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We have already experienced the consequences of such shocks. When the Russia-Ukraine war began, LNG prices surged to unprecedented levels. Bangladesh was forced to suspend spot LNG purchases in mid-2022. The result was immediate: widespread load shedding, industrial disruption, and a sharp rise in energy costs resulting in inflation.
Fuel prices had to be increased dramatically – diesel and kerosene by over 40%, and petrol by more than 50%. Inflation surged to nearly 10%, foreign exchange reserves came under pressure, the taka devalued substantially, and economic growth slowed. This was not a theoretical crisis; it was a lived one.
As I noted to S&P, Bangladesh's vulnerability lies not just in price exposure, but in structural dependence on a narrow supply geography. When one corridor dominates supply, resilience disappears.
Today, the risks are even more pronounced. Any escalation involving Gulf energy infrastructure or shipping lanes would not only disrupt supply but could fundamentally reprice LNG and oil markets. For countries like Bangladesh, this translates directly into power shortages, fiscal strain, and economic instability.
The lesson is clear: energy security cannot depend on geopolitical restraint.
A policy reset is urgently needed
Bangladesh must now move decisively from reactive crisis management to proactive resilience building.
We must build strategic reserves. We need to immediately expand the storage of diesel, furnace oil, coal, and LNG. During the Ukraine crisis, the absence of buffer stocks forced us into emergency purchases at peak prices. Strategic reserves are not an inefficiency; they are national insurance.
We must also diversify our LNG supply. Bangladesh cannot remain overly dependent on Middle Eastern supply routes. As I have highlighted in discussions with global analysts, long-term LNG sourcing from the United States, Australia, Africa, and other non-Hormuz linked regions is essential. Diversification may carry a marginal cost premium, but it is far cheaper than systemic disruption.
Expanding regasification and import flexibility is equally important. Reducing or delaying LNG infrastructure – whether FSRUs or terminals – is a strategic mistake. Redundancy in energy infrastructure is not excess; it is resilience. Bangladesh must ensure multiple entry points and sufficient regasification capacity to handle supply shocks.
We need to accelerate regional energy integration. Importing electricity from neighbouring countries, particularly hydropower and renewable energy, provides a crucial hedge against fossil fuel volatility. A diversified energy mix reduces exposure to global price swings.
It is time to unlock our domestic potential. Offshore gas exploration in the Bay of Bengal must be prioritised with urgency. Bangladesh cannot indefinitely rely on imports while sitting on underexplored resources.
Finally, we must rationalise energy pricing and taxation. Distortions in taxation across LNG, HFO, and coal must be addressed. A transparent and uniform pricing framework will improve efficiency, attract investment, and reduce systemic cost burdens.
The strategic reality
In my view, the global energy system has entered a new phase, one where the security of supply is as important as the cost of supply. This is what I have consistently conveyed in international forums: the cheapest molecule is no longer always the safest molecule.
Bangladesh stands at a critical juncture. The warning signs are visible. The Ukraine war was the first shock. The current Middle East tensions may well be the second.
We can either wait for the next disruption or prepare for it.
Energy security must now be treated not as a sectoral issue, but as a national strategic priority. Because when energy fails, everything else follows.
Muhammed Aziz Khan is the Chairman of Summit Group.
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.
