Iran-Israel war: Costs rise by Tk 680m for a single shipment of fuel

The cost of importing a single shipment of diesel has risen by approximately Tk 680 million (Tk 68 crore) as a direct result of the recent conflict between Iran and Israel. 

At around 3:00 am on 12 June, Israel launched an attack on Iran. Just one day later, a fuel tanker carrying 34,617 tonnes of diesel set off from Malaysia for the port of Chattogram in Bangladesh.

The vessel arrived at the port on 18 June. Under the impact of the Iran-Israel war, the cost of the single shipment rose by nearly Tk 680 million.

Globally, oil prices are primarily determined by two key markets – Singapore and the United States. Bangladesh imports and distributes all of its fuel through a single state-run entity, the Bangladesh Petroleum Corporation (BPC), which purchases fuel at Singapore market prices.

These prices are calculated based on rates provided by Platts, a Singapore-based international pricing agency. For every shipment, BPC pays based on the average price of oil from the two days before loading, the day of loading, and the two days after – totaling a five-day average.

According to BPC sources, on 13 June, a vessel named MT PVT Avira was loaded with 34,617 tonnes of refined diesel supplied by Indian Oil Corporation. The tanker reached Chattogram on 18 June, and all the diesel was unloaded by 22 June.

Diesel prices began rising on the day the oil was loaded. Platts data shows that on 11 June, the price of diesel was USD 79.24 per barrel. It rose to USD 81.37 on 12 June, and then jumped to USD 85.00 on 13 June – the very day the tanker was loaded. No prices were published for 14 and 15 June. However, the price increased to USD 86.78 on 16 June and further to USD 86.79 on 17 June.

According to concerned BPC officials, BPC had to pay USD 83.84 per barrel for the shipment as per the Platts’ five-day averaging system. Since the total volume of diesel was 34,617 tonnes, equivalent to 257,949 barrels, the cost of the shipment amounted to about USD 21.63 million. The amount converts to approximately Tk 2.65 billion (Tk 265 crore) in Bangladeshi currency. The payments are typically made within one month of unloading.

The price was relatively lower before the war. On 7 June, a vessel named MT Seaways Titan arrived at the Chattogram port, carrying 10,086 tonnes of diesel, which had been loaded on 2 June. The shipment was sent from Malaysia and supplied by a company called Unipec.

Based on the five-day average price from 29 May to 4 June, diesel was priced at USD 76.69 per barrel at the time. It indicates that the cost per barrel increased by USD 7.15 due to the conflict. BPC officials said the cost would have been Tk 1.97 billion (Tk 197 crore) had the 18 June shipment been loaded before the Iran-Israel conflict.

When asked in this regard, BPC director AKM Azadur Rahman said before the conflict, diesel prices ranged from USD 76 to USD 79 per barrel. On 13 June, the price began to rise, and the most recent shipment has incurred an additional cost of roughly Tk 680 million.