Could Gasoline Prices Surge in the Coming Year?

Anticipated increases in the cost of imported gasoline in Azerbaijan for the next year have raised concerns. According to budget projections for the coming year, revenues generated from excise taxes on petroleum product imports are estimated to rise by 42.9 percent.

Local experts contend that a surge in excise revenues may signal an impending price hike for gasoline brands AI-95 and AI-98 within the country. The last price increase for AI-95 and AI-98 gasoline occurred in July 2022, when the cost per liter for AI-95 went up from 1.6 to 2 Manats, and for AI-98, from 1.9 to 2.3 Manats. Both AI-95 and AI-98 gasoline are imported into Azerbaijan since they are not produced domestically.

Government officials have long promised that these gasoline variants would be manufactured within the country, particularly at the Heydar Aliyev Oil Refinery. Official sources indicate that the refinery has been undergoing extensive reconstruction and modernization for several years, with an expected completion date in 2023. However, there is currently no available information regarding the status of this project.

According to the State Statistics Committee, in 2022, Azerbaijan imported 102,540 tons of AI-95 and 99,490.98 tons of AI-98 gasoline, valued at $95 million. The majority of gasoline imports originate from Russia and Romania, with imports from Belarus commencing in April.

Asim Mollazade, Chairman of the Milli Majlis Committee on Energy and Natural Resources, explained Turan that this gasoline is not processed in Azerbaijan and that pricing is subject to the decisions of the countries selling it. He emphasized that it largely depends on the selling countries' policies.

Economist Zohrab Ismail linked the excise increase to the government's search for additional revenue sources, particularly in light of reduced income tax from production sharing agreements, as reported by the Accounts Chamber in its budget assessment. Ismail noted, "One of them is imported oil products."

While reports suggest ongoing refinery reconstruction, critics argue that the delay can be attributed to the State Oil Company's (SOCAR) management. The production of gasoline that meets European standards is seen as both feasible and crucial for Azerbaijan. It would not only meet domestic demand but also reduce the outflow of significant currency reserves spent on gasoline imports.

Ismail further warned that a potential increase in AI-95 and AI-98 gasoline prices could also affect AI-92 prices. Although the precise magnitude of price increases remains uncertain, experts speculate that the cost of AI-95 and AI-98 gasoline could rise by as much as 10 percent.

It's worth noting that AI-92 gasoline prices are regulated by the Tariff Council. Attempts to obtain comments from the Tariff Council and SOCAR on the views expressed in the article were unsuccessful. However, officials have asserted that SOCAR's management has undergone reforms in recent years and view such criticism as biased.