Miscellaneous

The government behaves with gasoline like a speculator, not like the government

On July 13, the price of AI-95 gasoline in Azerbaijan, which is used to fill non-Russian cars produced in the last 10 years, rose by 25%. To justify this decision, pro-government media explained the unprecedented increase in the price of imported premium gasoline. The production of the local AI-95 is promised only in the second quarter of 2023. As usual, after the announcement of new, increased gasoline prices,media provide a list of countries where gasoline is sold more expensive than in Azerbaijan. But the lists include countries (Georgia, Switzerland, Turkey) that do not have their own oil resources and buy fuel from abroad. It is more correct to compare prices in Azerbaijan with tariffs in oil states with a political system close to Azerbaijan.

We did this by collecting data on the prices of various grades of gasoline in three oil states: Russia, Iran and the UAE. To easethe analysis, we recalculate the tariff from the national currency to the US dollar.

Recall that gasoline AI 92 is sold in Azerbaijan for $0.60 (1 manat). The price of gasoline AI 95 is $1.2 (2 manat), AI 98 is $1.4 (2.3 manat).

In June 2022, AI-92 gasoline could be purchased in Moscow at prices ranging from 46.09 to 48.31 rubles (from $0.80 to $0.83). Gasoline AI-95 – from 50.99 to 56.59 rubles (0.88-0.98 dollars). AI-98 and above – from 59.60 to 63.99 rubles per liter (1.0-1.1 dollars). That is, in Russia only the 92-gasoline is sold more expensive than in Azerbaijan. Other brands are cheaper.

In Iran, there are quotas for retail sales of gasoline. Owners of private cars can purchase 60 liters of gasoline per month at reduced prices, owners of hybrid cars – 30 liters. A separate quota is provided for taxi drivers and motorcyclists, trucks and ambulances. The cost of a liter of quota gasoline is about 5 US cents, and outside the quota, that is, the free price is about 10 cents per liter.

The UAE Committee on Fuel Prices determines the cost of gasoline on a monthly basis, they also, like in Azerbaijan, proceed from international price processes. But in the UAE, from June 1, 2022, Special brand gasoline (AI 95) is sold for 4.03 dirhams, or $1.1 per liter. And Super 98 gasoline costs 4.15 dirhams per liter ($1.15). In Azerbaijan, gasoline AI 98 is sold for 2.4 manats, and in the UAE – 1.8 manats.

It should be noted that in the three countries with cheaper gasoline than ours, the average salary is higher than in Azerbaijan.

Why is that?Gubad Ibadoglu, a Professor of American Rutgers University, chairman of the Center for Economic Research, believes that “the increase in the price of AI-95 gasoline by 40 qapik, bringing it to 2 manats, means preparing first for a future increase in the cost of diesel fuel and cheap AI-92 gasoline, and then and the cost of public transport.The head of the Center for Oil Research, Ilham Shaban, said that one of the reasons for the rise in prices in Azerbaijan should be theabsence of transparency in the pricinggasoline. He compared with China: “Since July 13, the Chinese government has reduced the price of gasolineper ton and diesel from $53.5 to $51.3, explaining this by a decrease in the cost of oil on the world market. In China, a transparent fuel pricing scheme is practiced: if the price of oil changes by more than $1 on the world market within 10 days, then the price of gasoline on the domestic market is adjusted.”

In Azerbaijan, for a similar reason, the price of gasoline was reduced only once: on March 13, 2020. At that time, AI-95 gasoline fell in price in Azerbaijan from 1.5 to 1.2 manats (by 20%) against the background of world oil prices.

The Azerbaijani government has the ability to contain the rise in the cost of gasoline, but does not do it. As you know,on June 1, the four-month zeroing of the customs rate and excise tax (from 200 manats reduced to 1 manat per ton) for the import of AI-92 gasoline will stop. If the government does not again refuse to levy customs payments and excise tax on this grade of imported gasoline, 92-gasoline will rise in price. Exactly according to the same scheme, the government can nullify fees and excise taxes on imported AI 95 and 98 gasolines.

There are other reserves to reduce the price of fuel in Azerbaijan. Expert Natig Jafarli believes that since there is an oil refinery owned by SOCAR in Romania, and Romania buys Azerbaijani crude oil, then it is possible to refine our oil into AI95 and 98 gasoline at a plant in Romania. Until a plant for distilling oil into high-octane gasoline is built in Baku. Then the final product supplied from there to Azerbaijan should cost much less than today’s prices.

It is possible to sell gasoline in Azerbaijan at a low price, at least using the Iranian system of preferential sale in limited volumes per buyer; but the Azerbaijani government prefers to act like a speculator: buy cheap abroad to sell expensive domestically. Without spending a qapiks, you can earn millions.

In the meantime, Azerbaijanis are forced to invent their own, simple ways to circumvent inflated prices. They calculated and it turned out that if you pour 10 liters of 92-grade gasoline and 10 liters of 98-grade gasoline into the car tank, the two brands of fuel will mix and get 20 liters of AI-95 gasoline at a price of 1.7 manats per liter. This isby 30 kopecks per liter less than the established new price of 95th gasoline – 2 manats.

Source: Turan News Agency