Dealing with the Impact of Global Energy Crisis on Bangladesh

Every country in the world is battling shortfall of generating power capacity. The world has been engulfed into a prolonged energy crisis owing to the Ukraine War and ensuing sanctions on Russia by the West. On Aug. 20, 2021, the price of crude oil was $62/BBL that jumped to $120 on March 8, 2022 and is currently fixed at around $110/BBL. The price of natural gas was $4.77/MMBtu in December 2021 that shot up $9.0 on June 6, 2022 and later on reduced to $6.0. Gas prices in Europe surged to almost 700%. The increasing prices of oil and gas and disruptions in supply chains have caused the massive repercussions for the emerging economies in the developing world along with all oil and gas importing countries. Bangladesh as a fastest growing nation in the world is heavily dependent on gas and oil for stable energy supply in the country. One has to keep in mind that Bangladesh has revolutionized its power generation capacity from a meagre 4,942 megawatt in 2009 to 25,514 MW in 2022. The number of power plants has increased from 27 in 2009 to 152 in 2022. 

With increased generation of power Bangladesh has achieved tremendous economic progress over the past decade harping on thriving industrial sector in the country. However, the COVID-19 global pandemic and the ongoing Ukraine War and its associated syndromes have considerably disrupted supply of gas and oil which are extremely important for generation of power in Bangladesh. About 60 per cent of the country’s power plants are fired by gas. According to the Power Development Board of Bangladesh, at least 24 of the country’s 152 power plants in operation are currently facing gas supply shortages. The supply of gas to the power plants dropped to 900mmcf against the demand of around 1,600mmcf. In addition to high prices and disruptions of supply of gas, the world has been witnessing high inflation rate and rising deprecation of local currencies in many countries against US dollars. This has created multidimensional economic crisis in the world that has plagued both developed and developing nations. From the United States to Turkey, Germany to Sri Lanka, every nation is readjusting to the changed context of food and energy production and supply. Countries like Australia, Indonesia, South Africa, and Pakistan have already resorted to load shedding. 

Bangladesh has demonstrated a prudent and farsighted policy in its economic and industrial development over the past twelve years that has contributed to achieving growth miracle. The looming impact of global energy crisis must be addressed with the same degree of prudence and wisdom. The Bangladesh Prime Minister Sheikh Hasina has successfully led the nation in every major global crisis through her vision, courage and experience. As part of prudent and pragmatic approach to deal with the energy issue, the government has rightly opted for restricting electricity consumption across the country. The government has announced wide-ranging austerity measures in every sector so that Bangladesh would not suffer unduly and disproportionately which has been effective and praised by the common citizens of the country.

Another common instrument is load shedding which is considered to be very effective measure of austerity in the power generation sector. Load shedding is a way of keeping the system stable. Electricity is like most other commodities in that it is about supply and demand. The Bangladesh government has opted for load shedding to cope with growing shortage of gas supplies to power plants amid rising prices. Apart from load shedding, the government has imposed certain austerity measures for rationalizing the use of electricity in Bangladesh from demand side. Historically, there is a tendency among people in Bangladesh to resort to energy wastage either for extravagance or in negligence. The measures for restraining use of power includes banning of illumination at all sorts of events at homes, community centers, shopping malls and both government and private-sector offices; reducing office hours, reducing the use of air conditioners, keeping their temperature above 25 degree Celsius and asking people to complete wedding celebrations by 7 pm.

Although these demand side austerity measures are useful, they largely depend on the responses and cooperation of citizens from the different corners. It is also difficult to maintain nationwide monitoring of all austerity measures. In this context, load shedding comes as an important priority for the state agency, Bangladesh Power Development Board. Why is load shedding better justified as an effective measure to deal with power shortage? 

First, it is a supply side measure of austerity that saves power and reduces the gap between production and consumption. It is the most effective mechanism in terms of implementation. Second, energy experts support the load shedding measure as a right course of action. They argue that a proper and planned load management of the current energy supply could lessen the sufferings of the people. Third, experts also argue that austerity is a better option than increasing price. Power can be supplied through raising price but that will reduce people’s buying capacity and raise inflation. 

Fourth, at the moment the problem of gas supply shortage for Bangladesh power plants was unlikely to go anytime soon. It is a fact that until oil and gas prices are reduced in the world market, this crisis will continue. The problem could be solved by raising local gas production, but that will also take time. Fifth, energy crisis has spiral impact on the economy that needs to be addressed by taking pragmatic measure such as load shedding. It is a reality that if there is a crisis, production in factories will get affected, the export will get reduced. And if exports are reduced, foreign exchange reserve will be affected. It is also important to mention that according to the latest data, Bangladesh faces a shortfall of only 450-500 megawatts of power against the demand which is not a big deficit. Load shedding provides a plausible solution to address the issue of energy crisis at the domestic level. 

As a result, considering the current global energy situation, this is the best option for cost saving and keeping the system stable for the future. Experts also emphasize a cultural issue in the case of following restraining the consumption by the consumers, in other words, demand side behavior. It may be mentioned that in Japan, if the government asks citizens not to use air conditioners, at least 85% people will obey it but this is unlikely in Bangladesh. In this context, there is no alternative but implementing the load shedding. At least, the people would not suffer from price hikes of power and energy. Nobody can deny that Russia’s invasion of Ukraine and the consequent ructions to global energy markets has put a rocket under coal and gas prices. Load shedding and demand side austerity measures are absolutely essential to addressed the seemingly prolonged global energy crisis.

[Photo by Artur1917, CC BY-SA 3.0, via Wikimedia Commons]

*Doreen Chowdhury is an aspiring author and analyst. She is currently pursuing her Doctoral studies at University of Groningen. Her areas of interest are Comparative Politics, Globalization, South Asian Studies and Migration Studies. The views and opinions expressed in this article are those of the author.

US-China Tussle in the Middle East: The Biden Administration’s Response

The US President Joe Biden has repeatedly drawn flak for the deterioration of ties between Washington and Riyadh – attributed to his cold shouldering...

Indonesia’s ASEAN Summit 2023: Some Key Takeaways

The ASEAN Summit week in early September was filled with various impressions. To start, businesses convened the ASEAN Business & Investment Summit (ABIS) and...

The US in the G-20 Summit: Showcasing the US Leadership on Global Issues and Challenges

The significance of the G-20 meeting for the United States' leadership resides in the potential for President Biden to showcase his dedication to collaborating...