Export-Focused Oil Industry Leaves Consumers Short of Fuel

The hike in fuel prices that accompanies harvest season in Kazakstan is getting sharper every year because although the country produces a lot of oil, it lacks the capacity to refine it and in any case sends most of it for export.



Last week, the Kazak government expressed concern about the spike in the price of fuels and lubricants at the height of the summer harvest.



The trend has worsened over the past five years and Prime Minister Karim Masimov ordered a new committee to be set up to investigate the causes.



At the end of July, petrol prices went up from 68 to 84 tenge per litre, or from 50 to 70 US cents.



Minister of agriculture Akhmetjan Yesimov says that shortages of between 50 and 85 per cent of the required amounts of fuel are apparent in the main grain-producing regions – Akmola, Kostanay, Pavlodar and North Kazakstan – as well as in the only cotton-producing region, South Kazakstan.



Yesimov believes the refining firms are raising the price of petrol without good reason. On July 23, as a way of regulating prices, he proposed imposing a temporary ban on exports of fuels and lubricants.



The fuel shortage has been going on for the past month, although Energy Minister Bakhtykozha Izmukhambetov has given assurances that the crisis is now over and diesel prices will drop from 515 to 460 dollars per ton in August.



NBCentralAsia analysts say, however, that the underlying reasons for high prices are still there – an export-focused industry. Kayipbek Kambarov, chairman of the Association of Filling Station Owners, says there is no system to guarantee domestic fuel supplies, and it is more profitable both for crude oil producers and for Kazak refineries to export their products abroad.



“The major companies are oriented towards external markets, which are more profitable. A fraction of production remains in Kazakhstan, but it is never agreed in advance which region it will be supplied to”, he said.



Last year, Kazkakstan exported 57 of the 68 million tons of oil that it produced.



Shayirbek Konyrbaev, the head of agriculture in the Ordabas district administration, part of the South Kazakstan region, says he has been hearing farmers complain about high fuel and lubricant prices for the last several years, but nothing has been done about it.



“The [authorities] do nothing or they are unable to take charge of the situation,” he said. “If things were under control, this situation wouldn’t recur annually.”



“As a result, the agricultural producers suffer, because their production costs automatically increase as prices rise.”



(News Briefing Central Asia draws comment and analysis from a broad range of political observers across the region.)