SOCAR official: Gasoline price won’t go up thanks to government’s support

"All refineries around the world are stopped for maintenance once a year. This is called technical maintenance," head of the Oil Research Center, economist and expert Ilham Shaban told Report.

According to him, such processes previously happenedin Azerbaijan: "At that time, people ’never faced problems such as price rise in gasoline and import of gasoline by Azerbaijan."

No need for anxiety

The expert says this is caused by two factors: "One of these factors is that the current repair  lasted for two or three weeks. During the maintenance, the oil volumes in reservoirs of the Heydar Aliyev Baku Oil Refinery allowed the demand for fuel in the country to be met. However, we should take into account that Azerbaijan imported plenty of cars in the next years, especially after 2010. This means import of 75,000, even more than 100,000 cars in 2010-2015. Of course, the more cars are imported, the more gasoline is needed."

Shaban says that though the car import sharply declined in the next years, we can see import of 15-20,000 cars every year: "So many cars, which enter the domestic market, cause increase in fuel consumption."

He noted that apart from current repair, the Heydar Aliyev Baku Oil Refinery has been under modernization works since 2018: ‘The refinery stops operation for a month. That’s both period extends and domestic consumption increases. Therefore, along with high-octane gasoline, low-octane gasoline (Ai-92) is also imported. Imported gasoline is more expensive. Price changes in this period might discomfort consumers’.

Head of Oil Research Center Ilham Shaban

"As the prices in fuel market in Azerbaijan are regulated by the government, there is no need for any anxiety on price changes."

Ilham Shaban

Energy expert

The expert said that the fuel market does not follow the market rules and this market is regulated by the government: “Therefore, the Cabinet of Ministers made such a decision to insure itself during the maintenance. Because the period of maintenance lasts for a month or more, but the decision is made for 90 days. Certain force-major cases are also taken into account and duties for gasoline import are reset. This allows prices to be stable in the domestic market. This process repeats this year too because the reconstruction works are being carried out in the refinery."

Shaban says that import process of the gasoline will happen in 2020 too: "We expect the same thing in 2021 too. In 2021, the diesel will be produced under the Euro-5 standard. In the next year, gasoline will also be produced in Euro-5 ecological standard. This issue will be on the agenda by that time and as the prices are regulated by the government, there is no need for anxiety over price changes."

Note that the Cabinet of Ministers made amendment in its decision on “Commodity nomenclature of foreign economic activity of the Republic of Azerbaijan, rates of import customs duties and rates of export customs duties”. According to a document signed by Prime Minister Novruz Mammadov, import of gasoline with 92 octanes or more, as well as less than 95 octanes, will be exempted from customs duty from September 1, 2019.

Upon the amendments, the customs duties for abovementioned gasoline are reduced from 15% to 0%.

Upon another decision of the Cabinet of Ministers, excise tax rate for AI-92 gasoline was reduced from AZN 200 to AZN 1 a ton. These decisions will be valid for 90 days.

No price rise is planned

Ibrahim Ahmadov, Deputy Head of Public Relations at SOCAR, told Report that gasoline import is exempted from duties every year.

According to him, this is related to maintenance works in Heydar Aliyev Baku Oil Refinery, which are carried out once a year: "The period of maintenance is extended the recent years because of modernization works, which aim to produce higher quality fuel and increase the fuel standard to Euro-5."

The SOCAR official noted that as the analysis of some facilities takes more time, fuel reserves are not sufficient for consumption: "Therefore, we import AI-92 gasoline and this is temporary. The government does it in order to reduce the loss accruing from import. The loss is caused by higher prices of gasoline abroad than in Azerbaijan."

Ahmadov said that the gasoline price will not change

"Thanks to government’s support, temporary import of the gasoline does not cause a price rise. In order to prevent price rise, the government exempted gasoline import from duty. This reduces our loss and a part of accrued loss is later compensated by state budget as a social benefit."

İbrahim Ahmadov

Ahmadov said that the gasoline price will not change

The SOCAR official stressed that social policy of the state is to keep gasoline and diesel price at low level: "Generally, the consumers should buy fuel at a possibly low price. The government provides it by exempting import from duties and allocating additional funds from the state budget. Therefore, temporary maintenance works in Azerbaijan will not cause any price rise of gasoline."

Ahmadov noted that there will probably no need for import of diesel: "The refinery will continue to produce diesel. AI-92 gasoline will be imported. Last year the import was lower than demand for a month. Probably, it will not vary this year from last year. The precise figure of the imported fuel will be available after final result."

Which countries have exported gasoline to us and how much was the volume?

During the maintenance works in Heydar Aliyev Baku Oil Refinery in 2018, 72,596,050 tonnes of AI-92 gasoline worth $58,913,500 were imported.

In 2017, totally 78,253,610 tonnes of gasoline worth $46,537,380 were imported.

In 2018, Azerbaijan imported AI-92 gasoline mainly from Russia, Great Britain and Black Sea states. Last year, Azerbaijan imported 39,937,500 tonnes of gasoline worth $32,018,400 from Russia, 32,658,550 tonnes of AI-92 gasoline worth $26,895,000 from Great Britain.