Imported Fossil Fuel Dependent Energy Market of Bangladesh: How Global Energy Crisis Triggered Domestic Inflation?

With the depletion of domestic natural gas reserves, Bangladesh’s energy market has become increasingly dependent on imported energy – mainly petroleum, LNG and coal. Hence, the volatility in the global energy market is gradually impacting the energy sector as well as the economy as a whole. The Ukraine war has further accentuated the global energy market crisis both in terms of energy supply and energy prices which have multi-dimensional adverse impacts on developing countries. There is no comprehensive study found on the war-led global energy crisis and its impact on inflation where the level of adversity has been measured. Most of the studies are indicative in terms of causal relationships between energy crisis and its impact on macroeconomic aggregates including inflation. Hence a quantitative analysis is required to show how the global energy market crisis led to domestic inflation, particularly in developing countries. In this backdrop, this study will seek to estimate the level of inflationary impact on Bangladesh economy due to global energy price volatility.