Expert: Record oil and gas prices to fill Azerbaijan's budget

High oil and gas prices will serve the flow of revenues to the Azerbaijani budget, expert in fuel and energy complex, Deputy Chief of the MGIMO International Institute of Energy Policy and Diplomacy at the Russian Foreign Ministry Igbal Guliyev told Report's Russian bureau.

"Rising prices will become an opportunity for SOCAR to expand its investment program and for the state to increase spending on socioeconomic purposes," he said.

According to the expert, Azerbaijan can direct a part of all revenues received from rising oil and gas prices to the restoration of Karabakh.

According to Guliyev, in 2020, the fundamental basics of the world energy industry were shaken amid the remaining demand for hydrocarbons in the world economy: "In essence, high prices for natural gas and the observed increase in oil prices are a common manifestation of the economic laws of supply and demand. On the demand side, there has been a significant demand for economic recovery after the pandemic, coupled with the continued high rates of development of the Asia-Pacific countries."

The expert stressed that the sharp imbalance in 2020 is reflected in the emerging vacuum of economic and technical opportunities to meet the rapidly growing needs of the global resource market: its primary consumption falls on the transport sector. In the gas industry, the situation was slightly different. Before the pandemic, there was a significant overproduction of LNG on the world gas market due to the forced construction of new liquefied gas plants in the USA, Russia, Australia, etc. In this situation, even a slight decrease in consumption led to a collapse in natural gas prices. "

In his opinion, at present, the price situation has stabilized, which was primarily facilitated by the growth in gas consumption in the EU due to the cold winter, Germany's refusal of nuclear energy, and the inability to fully replace nuclear generation with renewable sources. Also, as one of the reasons, he noted the rise in prices for natural gas, which was the liberalization of the European gas market and some alignment of the price level with the Asian gas market, where prices were traditionally higher than European ones.

"Energy consumption has generally decreased due to lockdown, but to a greater extent, it concerns oil, since about 60% of its primary consumption is formed in the transport sector. The situation was slightly different in the gas sector. Even before the pandemic, a significant overproduction of LNG had been observed even before the pandemic due to the rapid construction of new liquefied gas plants in the United States, Russia, Australia, etc. In this situation, even a slight decrease in consumption led to a collapse in natural gas prices."

In his opinion, at present, the price situation has stabilized, mainly due to the growth in gas consumption in the EU amid the cold winter, Germany's refusal from nuclear energy, and the inability to fully replace nuclear generation with renewable sources. Also, as one of the reasons, he noted the rise in prices for natural gas, which was the liberalization of the European gas market and some alignment of the price level with the Asian gas market, where prices were traditionally higher than European ones.