Originally posted in The Daily Star on 25 August 2026
The global economy is facing an energy crisis due to supply disruptions amid the war in West Asia. Since energy, vital to economic security, has also become a key part of geopolitics, countries have become more vulnerable to energy shocks. The crisis began a few years back, following the Covid pandemic, when energy demand started to rebound. However, supply disruptions and low investment in exploring and developing new oil and gas fields globally tightened energy markets. Then the Russia-Ukraine war in February 2022 disrupted Europe’s gas supply, leading to a sharp increase in oil and gas prices. This also changed the global energy trade. For example, Europe reduced its reliance on Russian pipeline gas and increased LNG purchases from other sources such as the US and Qatar. Meanwhile, Russia exported its oil to Asian markets including China and India. Price-sensitive developing countries, including Bangladesh, India, and Pakistan, faced repercussions as they had to pay high spot LNG prices and struggled to secure cargo.
Then, on February 28, 2026, the US-Israel attack on Iran disrupted the energy corridor of the Strait of Hormuz, through which around 20 percent of global oil passed, creating the largest supply disruption in the history of the global oil market. The immediate impact of the energy crisis was reflected in prices, with far-reaching implications. It has driven up the costs of transportation, electricity, fertiliser, and manufacturing, resulting in higher food prices and higher inflation.
In Bangladesh’s case, global energy shocks have aggravated problems created by domestic policies and exposed longstanding vulnerabilities in the country’s energy sector. Lack of investment in domestic gas exploration, declining production from existing fields, increased dependence on imported fossil fuels, inadequate diversification of the energy mix, weaknesses in transmission and distribution, limited renewable energy development, and expanding power capacity without sufficient primary energy sources had already made the energy system vulnerable. As a result, Bangladesh is not merely experiencing an energy supply disruption, but facing an energy security problem.
For decades, Bangladesh enjoyed the economic advantage of its relatively inexpensive domestic natural gas, which supported electricity generation, fertiliser production, manufacturing, and household consumption. However, gas production peaked years ago and has been declining since. Imported LNG is filling the gap. This is not only expensive but has also created vulnerability for Bangladesh. Global price hikes, global tensions, and supply disruptions create uncertainty about its availability.
The economic cost of this situation is very high. Industries such as textiles, spinning, ceramics, steel, and fertiliser that rely on gas cannot operate when gas pressure is low or supplies are unpredictable, and face production disruptions. So, they are forced to either reduce production or use more expensive alternative fuels. Firms are also struggling to adjust production and investment because of unpredictable energy supplies. This can lead to an investment crisis. Without investment, goals like job creation, export diversification, and economic growth will be difficult to achieve.
Besides, as Bangladesh approaches graduation from Least Developed Country (LDC) status, its exporters will have to compete in the global markets through higher productivity, energy efficiency, and technology. It cannot compete on wages alone. Therefore, higher production costs from energy disruptions could become a barrier to achieving these goals.
In addition, rising diesel, gas, and electricity prices raise costs for transportation, irrigation, industrial output, and food distribution, which consumers ultimately bear. This is especially worrying given years of high inflation and weakened household purchasing power. Therefore, energy policies must balance economic efficiency with safeguarding vulnerable consumers.
In the short term, the objective should be to stabilise supplies and reduce economic disturbances. LNG procurement should adopt a more strategic approach, balancing long-term contracts that provide greater supply and price certainty with spot-market purchases to meet additional demand. Relying heavily on spot LNG can make Bangladesh vulnerable to abrupt international price spikes, whereas poorly negotiated long-term contracts can lead to extra costs.
Besides, gas distribution should follow clear and transparent economic priorities during severe shortages. Export-oriented and employment-intensive industries, efficient power plants, fertiliser production, and other essential activities should have predictable supplies. Energy conservation should be more systematic. Clear energy-saving standards should be in place for government offices, commercial buildings, shopping centres, and large users.
Furthermore, uniform price increases of energy are crucial but not sufficient. Low-income households need targeted support in this regard, but others should pay the market price. The government cannot afford blanket energy subsidies.
Another top priority for the government is to explore domestic gas, both onshore and offshore, to enhance energy security—a long-neglected task. The current government should strengthen the capacity and funding of Bangladesh Petroleum Exploration and Production Company Limited (BAPEX). Where appropriate, it could attract internationally reputed firms on a competitive basis. With successful discoveries, dependence on imported LNG could be reduced, to some extent protecting Bangladesh from global price fluctuations.
It is also essential to improve the transmission and distribution networks. Without removing pipeline bottlenecks and improving network management, system losses and inefficiencies will limit the benefits of additional supply. Enhanced energy efficiency can help Bangladesh lower its energy demand. Industries, buildings, and households can adopt more efficient boilers, motors, captive power plants, air-conditioning systems, and appliances. This will help reduce energy use while maintaining production and economic growth. Sometimes, improving energy efficiency could be less costly than increasing energy supply.
Another area not fully explored yet is the potential of renewable energy. Although policies exist on paper, implementation still lags. Despite land constraints, solar power could be expanded through rooftops, public facilities, irrigation and other suitable spaces, improving energy security, reducing fuel imports, and lessening the burden on foreign reserves.
Lastly, Bangladesh should shift its focus away from merely increasing installed generation capacity, which offers little security if the plants lack fuel, transmission networks are insufficient, and electricity remains unaffordable. Instead, it must prioritise accessibility, affordability, reliability, and fuel diversity to build a resilient, robust energy system.
Regional electricity trade, particularly through access to hydropower from Nepal and Bhutan, needs to be explored. Additionally, strengthening institutional coordination, ensuring transparent procurement, maintaining accountability, and establishing predictable regulations are crucial to attract investment and encourage private-sector participation.
External events could worsen Bangladesh’s energy challenges, but whether global shocks turn into domestic crises largely depends on internal decisions. The primary goal should be to prevent energy from becoming a persistent barrier to Bangladesh’s investment, industrial growth, and economic development.
Dr Fahmida Khatun is an economist and executive director at the Centre for Policy Dialogue (CPD). Views expressed in this article are the author’s own.
