Energy Crisis and Economic Impact of the Gulf War on Bangladesh

The Gulf region is a crucial hub for global energy supply. Approximately 35–40% of the world’s crude oil originates from this region. Therefore, even minor instability significantly affects global oil prices and supply. The ongoing war in this region has created a deep crisis for energy import-dependent countries like Bangladesh. Around 70–75% of the country’s total energy demand is met through imports. Diesel and kerosene are almost entirely imported, while only about 40–45% of petrol and octane are produced domestically. Saudi Arabia, the United Arab Emirates, Qatar, and Iraq are the primary suppliers.

Due to the war, oil production and exports have been disrupted. Many oil fields have been partially or fully shut down, shipping has become risky, and international transportation costs have increased by 20–25%. For example, a reduction of approximately 1.3 million barrels per day in exports from Saudi Arabia and Qatar has increased global oil prices by 15–20%. As a result, the Bangladesh Petroleum Corporation has failed to procure sufficient fuel on time.

The increased shipping risks have forced companies to use longer routes, extending import times by 15–20 days and raising costs by 25–30%. Some contracts have been suspended or delayed, reducing the country’s fuel reserves. By June 2026, diesel reserves had dropped to just five days’ supply, compared to the usual 15 days.

Domestic distribution systems have also become chaotic. Long queues at petrol pumps, frequent stockouts, and waiting times of four to six hours in various parts of Dhaka have become common. Shortages of petrol and octane in urban areas are disrupting transport and worsening traffic congestion. Diesel shortages have significantly impacted the rural economy, as it is essential for irrigation, transportation, and agricultural activities. The lack of kerosene has created hardships for low-income rural populations. According to government data, around 35% of rural households still rely on kerosene for cooking and lighting. Its price has increased by 20–25%, affecting daily life and livelihoods.

Artificial shortages have also emerged in the market. Hoarders and middlemen are stockpiling fuel to raise prices, pushing them 30–35% above government-fixed rates. For example, the retail price of diesel in Dhaka has risen from Tk155 per litre to Tk205. Government measures include fuel rationing, diversification of import sources, and promoting alternative energy use. Imports from India and Russia have provided some relief, but they are insufficient to meet total demand.

The transport sector has been the most visibly affected. Buses, trucks, and launches are facing disruptions due to fuel shortages, delaying the delivery of essential goods and increasing prices. Transport costs in Dhaka’s food markets have risen by about 20–25% by June 2026. Electricity generation has also been affected. Although Bangladesh primarily relies on natural gas for power, diesel- and furnace oil-based plants have experienced increased load shedding. Industrial production, especially in garments and cement sectors, has suffered.

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The economic impact is severe. The cost of fuel imports has increased, putting pressure on foreign currency reserves. By June 2026, losses have reached approximately 1.5 to 2 billion dollars. Increased subsidies have widened the budget deficit by 5–7%.

In summary, the 40-day Gulf war has created a multidimensional crisis in Bangladesh’s energy sector. Shortages of petrol, octane, diesel, and kerosene have affected not only energy systems but also transport, electricity, industry, and daily life. It has exposed the country’s vulnerability due to its dependence on imported energy.

Impact of the energy crisis on agriculture and food security in Bangladesh

The oil crisis caused by the Gulf war has severely affected Bangladesh’s agricultural sector. The country’s agriculture depends heavily on diesel-powered irrigation, pumps, and mechanisation, all of which have been disrupted due to fuel shortages and rising prices. About 60–65% of irrigated land is used for Boro rice cultivation, and this irrigation is almost entirely dependent on diesel pumps. By June 2026, diesel prices increased from Tk155 to Tk205 per litre, forcing farmers to bear additional costs. This has directly affected crop yields; preliminary estimates suggest a 10–15% decline in Boro rice production. Reduced output will increase reliance on food imports, putting further pressure on foreign currency reserves.

The upcoming Aus rice season is also being affected. Although Aus is generally rain-fed, irrigation is needed in its early stages in many regions. Due to diesel shortages, farmers are unable to prepare land on time. Power tillers and tractors require diesel, which is either unavailable or excessively expensive. As a result, Aus cultivation is being delayed, with potential yield reductions of around 20%.

Vegetable production is also facing serious challenges. About 75% of vegetable farming in Bangladesh depends on irrigation, especially crops like leafy greens, cabbage, tomatoes, and gourds. Diesel shortages are disrupting irrigation, reducing production and supply. By June 2026, retail vegetable prices have increased by 15–20%, affecting nutrition and food consumption.

Agricultural mechanisation has also been disrupted. Power tillers, harvesters, and threshers are diesel-operated. In areas like Halishahar and Sirajganj, power tiller usage has declined by about 40%, delaying land preparation, planting, and harvesting. Rising production costs are reducing farmers’ profits, pushing many toward losses.

Transport disruptions have also affected agriculture. Crops rely on trucks, vans, and other vehicles to reach markets. Increased diesel prices and shortages have raised transport costs by about 25%. By June 2026, rice prices in Dhaka have risen by 8–10%, impacting low-income populations.

The national economy is also significantly affected. Agriculture contributes about 14–15% to GDP. A decline in agricultural production could reduce overall economic growth by 1 to 1.5%. Increased food imports have raised foreign exchange pressure; by June 2026, food import costs have increased by about 300–350 million dollars.

Food security is also at risk. Reduced production and higher prices make food less accessible for low-income groups. The risk of malnutrition among children and women increases, leading to deficiencies in protein, vitamins, and minerals. This crisis also has national security implications. Food and energy shortages can lead to social instability. Historically, food crises have often triggered political and social unrest.

In summary, the oil crisis caused by the Gulf war has had multidimensional impacts on Bangladesh’s agriculture and food security. Boro and Aus rice production and vegetable farming are disrupted, mechanisation and transport are hindered, production costs are rising, and food and nutrition security are under threat, with negative consequences for the economy and social stability.

Measures to address the oil crisis

Bangladesh is currently facing a severe oil crisis due to the Gulf war, affecting not only the energy sector but also agriculture, food security, industry, transport, and the overall economy. Learning from this situation, immediate and effective measures are essential. Without ensuring energy security, it will not be possible to sustain food security and economic stability in the long term.

Diversification of energy sources is crucial to reduce the impact of global instability. Bangladesh currently depends heavily on Middle Eastern countries such as Saudi Arabia, the UAE, Qatar, and Iraq. Establishing long-term agreements with countries in Africa, Southeast Asia, Russia, and Latin America can reduce supply chain risks.

Developing strategic fuel reserves is essential. Developed countries maintain reserves for three to six months; Bangladesh should aim for at least 60–90 days. This can be achieved through special storage facilities and fuel blending strategies.

Promoting alternative energy in agriculture is also important. Expanding the use of solar-powered irrigation pumps, biogas, and electric agricultural machinery can significantly reduce dependence on diesel. In regions like Bogura in Rajshahi, solar pumps have reduced irrigation costs by 20–25%.

Improving transparency and efficiency in fuel management is necessary. Strict monitoring to prevent hoarding and black marketing, along with digital tracking systems, can help regulate supply chains and sales. Increasing subsidies and incentives for farmers can mitigate the impact of rising diesel prices. For example, a subsidy of Tk50–60 per litre could help sustain irrigation and maintain crop yields.

To ensure food security, the government must increase food imports, build reserves, control markets, and strengthen social safety programs. Expanding renewable energy and electric vehicles will reduce dependence on oil and ensure long-term economic and food security.

International cooperation is also important. Collaboration with South Asian countries and international energy agencies can help secure alternative supply routes. These combined efforts can gradually shift diesel-dependent agriculture, electricity, and transport systems toward renewable and electric solutions, ensuring long-term resilience.

The current oil crisis is a significant warning for Bangladesh. It highlights that as an import-dependent country, energy security is essential for ensuring agricultural production, food security, nutrition, and economic stability. Addressing the crisis requires diversification of energy sources, strategic reserves, alternative energy use, farmer incentives, market monitoring, and international cooperation.

In conclusion, although the current crisis is temporary, its lessons are long-term. With proper planning and policy measures, Bangladesh can not only overcome this crisis but also build a strong foundation for future energy, food, and economic security. This should be seen as a timely and effective opportunity to ensure agricultural sustainability, public nutrition, and social stability.

The author is an economist, researcher, and columnist. He can be reached at: [email protected]