Kazakh Paper Eyes World Oil Price Decrease Effect on Domestic Market

Text of report by Alexey Konovalov entitled “Price of a fall” by privately-owned Kazakh newspaper Vremya website on 8 October

On Monday, 6 October, the price of oil fell below 90 dollars a barrel for the first time since February. Economists predict that the fall will continue to the level of 40 dollars. The falling of the “black gold’s” price promises many problems. However, officials prefer not to notice them. On the contrary, they are painting bright pictures expecting new inflows of oil-dollars.

Owners of oil refineries always say that fuel and lubricants’ prices at petrol stations at home depend on world oil prices. That’s why the news of oil price falls must come as music to the average man’s ear. As is known, quite a bit of the cost of food products and public utilities consists of expenses on fuel and lubricants. But economists say that Kazakh citizens must not hope for the better.

“There will be no reduction of public utilities charges,” said economist Sergey Kravets. “All enterprises bought fuel oil and other oil products for the heating season before the oil price fall. Besides, it must be taken into account that under our laws monopolists can change charges only once a year. They have already done it. One should not expect cheap fuel as well. It might instead go up.”

“The fall of world oil prices will not have effect on the Kazakh market of oil products any time soon,” said economist Yersen Abil. “Besides, if oil prices continue to fall till the middle of November, we can expect a rise in petroleum products’ wholesale prices: companies will try to use the domestic market to compensate their losses in connection with new duties on oil exports. The government will have to compensate budget losses by increasing excise duties on oil products.”

It must be recalled that Kazakhstan’s budget for 2009-11 is based on a 60-dollar oil price. Though, Prime Minister Karim Masimov was warned by Ministry of Economy and Budget Planning analysts about possible considerable oil price falls down to 40-50 dollars per barrel. They made the forecast two weeks before the budget’s adoption and a month before the prices began to fall. But the prime minister did not listen to the “irrelevant” prognosis. Even though it was confirmed by International Monetary Fund experts and the OPEC head Chakib Khelil.

“Oil will continue to fall in price next year,” the OPEC head told [the Russian] Interfax [news agency] on 2 October. “In June 2009 the average price will be about 40 dollars a barrel,” [he said].

From 3 October OPEC member countries reduced oil extraction by 4 million barrels a day. They appealed to other oil exporting countries to produce less as well. Kazakh officials have given no reaction to that so far. Energy and Mineral Resources Minister Sauat Mynbayev absolutely disagrees with leading international financial analysts and the OPEC head. That’s why he has made a cheerful forecast regarding oil prices.

“We believe that in the short term, prices will fluctuate and may fall,” the minister told the KIOGE 2008 international [oil and gas] conference in [the commercial capital] Almaty. “Markets have been nervous and prices are not very high now. But in the medium and long term, oil prices will grow.”

Sauat Mynbayev did not specify how high they will grow.

Originally published by Vremya newspaper website, Almaty, in Russian 8 Oct 08.

(c) 2008 BBC Monitoring Central Asia. Provided by ProQuest LLC. All rights Reserved.