Kazakhstan’s government has announced an imminent increase in the price of fuel, effectively declaring defeat in its attempt to keep costs low for domestic consumers.
As of April 12, the benchmark cost of AI-92 gasoline, the type most favored by Kazakh motorists, will increase by 11 percent to 205 tenge ($0.46) per liter, while prices for diesel will go up by 20 percent to 295 tenge.
“This is not an easy decision, but it has been forced upon us. If this is not done now, then in the near future we will face a shortage of fuel,” Prime Minister Alikhan Smailov told reporters on April 4.
Smailov noted in his remarks that high rates of consumption for diesel — at 370 liters annually per capita, nobody in Central Asia uses more than Kazakhstan — is a key driver of deficits. Even fuel users in Russia, an energy-rich neighbor to the north, get through only 225 liters of diesel annually.
Demand for other fuels and lubricants have seen a surge too.
Smailov linked the apparent increase in consumption to the so-called grey export of the materials to neighboring countries. Diesel in Russia costs around 45 percent more than in Kazakhstan. In Kyrgyzstan, prices are 64 percent higher; they are double in Uzbekistan.
The fuel is often carried across borders by individual motorists filling up their own tanks and then siphoning out on the other side.
If the price disparity is not reduced, Kazakhstan may this year face a shortage of fuel in the amount of 850,000 tons, Smailov said.
“Our cheap fuel contributes to the economies of neighboring countries to the detriment of our own national interests. Therefore, in order to stabilize the situation on the fuel and lubricants market, it is necessary to reduce the price difference,” Smailov said.
He said other attempts to clamp down on grey exports have been tried and have failed.
Smailov said the government will, however, seek to avoid shocks in the agricultural industry by maintaining fuel prices level until completion of the spring farming season.
Kazakhstan has for many year relied on its status as a major oil producer to keep prices for fuel on an even keel so as to avoid domestic instability.
ADVERTISEMENT
Events in early 2022 are a vivid illustration of what can happen when this compact is disrupted. Price rises in western regions triggered relatively small protests that eventually gained momentum and turned into major nationwide rallies.
By Almaz Kumenov via Eurasianet.org
More Top Reads From Oilprice.com:
- Oil Prices Head Lower In Calmer Trade
- China Sees EV Sales Slumping To 8 Million In 2023
- Glencore-Teck Merger Proposal Faces Skepticism
