New fuel prices: What does this mean for the Azerbaijani economy?
By Sabina Alizade
Azerbaijan's Tariff Council has announced plans to raise the prices of AI-92 automobile gasoline and diesel fuel. The decision was made at the latest meeting of the Council on June 29. The new prices take effect from July 1.
This decision was made in response to the increased production costs of these types of fuel in accordance with Euro-5 standards.
In an interview with News.Az, economic expert Natig Jafarli noted that there is no economic justification for the latest decisions of the Tariff Council in Azerbaijan.
"There is no sharp increase in oil prices or other issues on the global market that would necessitate a fuel price hike. The decrease in the cost of AI-95 gasoline seems aimed at mitigating the increase in AI-92 gasoline prices. Additionally, we have started local production of AI-95 gasoline, which was previously imported. This led to a slight price reduction, but its impact on the economy is insignificant," he said.
The expert added that the main impact comes from diesel fuel. "The increase in diesel fuel prices will lead to higher prices for food and in the agricultural sector. This is already axiomatic. It is impossible for an increase in diesel fuel prices not to affect food prices or the agricultural sector, as diesel fuel is one of the main cost components in agriculture, logistics, and freight transportation," Jafarli noted.
In turn, economic expert Rashad Gasimov noted that the price reduction for AI-95 fuel is due to the start of local production and the absence of corresponding market demand, as well as the fact that demand for this fuel is adequately met by production capacities.
"Of course, changing the price of this type of fuel is not that difficult. This change is not related to the Tariff Council's decision. It is implemented by a decision made by SOCAR. Therefore, it is possible that the price reduction occurred as part of a relevant agenda, but prices may rise again in the future. However, in fact, the majority of the population was not a consumer of this type of fuel in terms of purchasing power, and it was necessary to make a decision supporting demand in this direction," the expert said.
Gasimov emphasized that the rationale for raising prices for other products, such as AI-92 and diesel fuel, does not seem reasonable.
"If the goal was indeed to increase energy consumption efficiency in the country, reduce risks, or increase the number of hybrid and electric vehicles, it would have made sense to create a fund. The revenue from the price increase could have been directed to this fund, and the accumulated funds could have been used to subsidize interest rates on loans for hybrid and electric vehicles, provide government subsidies, and implement projects to adapt the internal infrastructure. This would have been more logical, but in this case, it is clear that the decisions made are aimed at increasing revenue in this direction," the expert stated.
Gasimov noted that SOCAR does not have the authority to implement the country's environmental and transport policy, and that the introduced regulations in the taxi sector could contribute to the increased use of public transportation, which would reduce the use of cars and decrease environmental harm.
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