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To: Peter Howie, Associate Professor of NU GSPPDate: 29th November, 2013 The main economic concepts in this article are supply and demand. In the article it is said that Russia has recently increased fuel prices by 30%. It has happened because in two countries Libya and Egypt there is still civil and economic instability, which affects their oil supply. At the same time Russia has its own inside issues with oil supply. Unfortunately, Kazakhstan is dependent on Russian fuel, especially on high-octane petrol, this is mainly because Kazakhstan’s domestic factories are not upgraded yet. This problem causes Kazakh oil market to be very sensitive and reflective towards Russian oil market fluctuations. According to experts, Kazakhstan’s oil demand is about 2.5 million tons per year, while near 1/3 of this amount comes from Russia. Despite of the experts’ opinion that Kazakhstan should not worry about the next few months about oil price rising in Russia (because Kazakhstan had collected enough oil reserves), there is still ties and dependency with Russia in term of oil market in the long-run. If Russia increases prices of its exported fuel, Kazakhstan will still demand fuel from them, which means it should also do the same with prices after a while – to rise. This will negatively affect Kazakh side. For example, if entrepreneurships would start losing of their profit, they would also rise a price, and as a result of this story regular Kazakhstani customers would face high prices on different commodities in the nearest future. In this situation, if it is possible, Kazakhstan should quicker build its own refineries. I think it is better to invest in domestic fuel factories and be less dependent on Russian neighbor. Also, I think Kazakh government should consider regulations such as price ceiling on oil in order to help the market reach new consensus and protect from high prices middle class of the country.
Two important reasons made influence of Russian 30% oil rising – result of RussianShortage of fuel: a) temporary closure of three refineries there, b) situation with oil production in OPEC country Libya. These conditions were rout causes to create the situation when those companies that are in charge of setting price for oil in Russia could speculate on the market with the price. Due to the fact that Kazakhstan is dependent on Russian fuel and would still buy it, Kazakhstan would also have to rise petrol prices. That what is predicted according to the article. Date: 2015-12-24; view: 908
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