Bangladesh and Pakistan hit by energy crisis from Gulf fighting
A factory in Bangladesh that makes clothing for the American designer, Tommy Hillfiger's clothing company. © ANDREW HOLBROOKE/Corbis via Getty Images
Bangladesh’s export factories are cutting production and Pakistan has rolled out fuel subsidies as disruptions to Gulf energy supplies drive shortages and higher costs across South Asia.
The pressure follows disruptions to oil and gas shipments through the Strait of Hormuz after the US-Israeli attacks on Iran. Fighting between Saudi Arabia and the Iranian-backed Houthis has also threatened trade through the Red Sea, another key route for Gulf energy supplies.
Bangladesh has been particularly exposed. The country relies heavily on imported LNG for electricity, and disruptions to supplies from Qatar have forced Dhaka to seek more expensive cargoes on the spot market. The gas and power shortages have triggered blackouts and factory shutdowns.
Asian spot prices for liquefied natural gas (LNG) have climbed close to $30 per million British thermal units from around $10 before the conflict.
The pressure is now hitting Bangladesh’s garment industry, its biggest export sector. A survey by the Bangladesh Knitwear Manufacturers and Exporters Association found that 55% of factories have seen buyers cancel or reduce orders because of gas and power shortages since late August, while 78% partially halted production.
📹 Shutters Down, Frustration Up - Islamabad Goes Quiet At 9PM As Fuel Crunch BitesTraders warn shorter hours could further squeeze already struggling businesses as Pakistan brings back fuel-saving austerity measures amid rising energy costs.Restaurants can stay open until… https://t.co/yVL8F6hgxZpic.twitter.com/bVE4hJjEPT
Production delays are also raising costs. One garment producer spent $50,000 to air-freight jackets to a French buyer after delays, Reuters reported. Factories have turned to diesel to keep operations running, and industrial growth and production are slowing, Power Minister Iqbal Hasan Mahmud said this week.
Pakistan is also facing mounting pressure from expensive fuel. Its power sector could require up to 400 million cubic feet of gas a day through winter, while only two LNG cargoes have been confirmed for September.
READ MORE: Indian fuel exports face pressure as Saudi halts crude supply Islamabad introduced a nationwide relief program this week offering eligible motorcycle, rickshaw, and small-car owners a subsidy of about $0.36 per liter of fuel within capped quotas.
And in a throwback to restrictions that were imposed in April, markets now have to close by 9 PM, marriage halls by 10 PM, and restaurants by 11 PM local time. Islamabad also banned official dinners, except for foreign visitors and delegations, and the purchase of new government vehicles.
Supply risks remain elevated. Only four commodity vessels crossed the Strait of Hormuz on Thursday, compared with a ten-day average of around 16, although three LNG vessels reappeared outside the strait.
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