How will the increase in oil prices affect the Republic of Azerbaijan?

According to the international group Tasnim news agency, although in the world markets about The price of oil in the Republic of Azerbaijan has seen a slight increase, but foreign media write that despite the conflicts in the Middle East, no noticeable change in the growth rate of oil prices has been observed in recent weeks.

According to the latest bank forecasts Globally, if the conflict in the Middle East escalates, the price of oil may exceed $150 per barrel.

The World Bank has calculated that just one year after the increase in prices as a result of Russian intervention In Ukraine, the ongoing wars in the region can lead to a further increase in energy and food prices.

Currently, the price of oil in the world market is stable at around 90 US dollars per barrel, and the forecast Its price could fall.

However, the World Bank warns that this forecast could change quickly.

Based on the worst The scenario presented by the World Bank, if the conflicts flare up, a situation similar to the oil crisis of the 1970s may arise, which could increase the price of oil between 140 and 157 dollars per barrel.

According to him, the war between Russia and Ukraine had a devastating effect on the international economy that continues today.

Indermit Gill added that the “dual energy shock” scenario affecting oil and gas supply is unprecedented in recent decades and requires policymakers to be vigilant.

Gas prices in Europe rose this month as investors worried that a pipeline cut near the Gaza Strip would hit global supplies.

However, oil markets have so far been affected by the conflict.

These days, the budget plan for 2024 is discussed in the National Assembly of Azerbaijan, and the price of oil also affects the forecast of expenses in the budget project.

World Bank’s “bad scenario” is “good” for Azerbaijan

RTL”>According to him, while the price of oil is high, the government of Azerbaijan receives more funds, and most of it is allocated to investment projects and revitalization of areas liberated from occupation.

Ilham Aliyev , the president of Azerbaijan has said: In the last 3 years, 7 billion US dollars have been spent from the budget of Azerbaijan for the reconstruction of the areas liberated from the occupation of Armenia. Turk in Astana, Kazakhstan also said that next year at least 2.4 billion US dollars will be allocated for the rehabilitation of liberated areas.

If the Middle East crisis does not intensify, according to current forecasts, the wholesale price The oil market will drop to $81 per barrel. According to the World Bank, this is a good scenario.

The World Bank announced that the global economy is in a better state than the previous conflicts in the Middle East.

Firoze Nehmadova is of the opinion that Azerbaijan’s economy is now more stable than the years of crisis and devaluation.

Nehmadova believes: Azerbaijan’s economy is based on the sale of natural raw materials It is like oil and gas and is not diverse. This industry is not a stable field in terms of price. I think that regardless of the increase or decrease in the price of energy carriers in the world market, a sharp price change will not have such a big negative impact as in 2014-2016, which was considered a bad period for Azerbaijan.

According to him, the good scenario of the World Bank is not bad for Azerbaijan because the government has been using a cautious figure related to the price of oil in the budget in recent years. Each barrel of oil in the world market was set at 60 US dollars, which remained unchanged in the next year’s budget bill. This is despite the fact that during the last 10 months of 2023, the average oil price of Azerbaijan in the world markets was above 74 dollars.

Azerbaijan’s budget growth slows on inflation It is a recovery phase.

High energy prices can lead to high inflation, as happened after the Russian invasion of Ukraine, which can affect the prices of other goods.

After the start of the Russia-Ukraine war, in April last year, the United Nations Food Price Index announced the average prices of cereals, vegetable oil, dairy products, meat and sugar. According to this index, the price of food has reached the highest level in the last 60 years of calculations.

According to this index, the price of vegetable oil increased by 23% and beans by 17%. Sugar increased by 7 percent, meat by 5 percent, and dairy products, which were less affected by the war, increased by only 3 percent. The nominal growth of Azerbaijan’s budget, half of which is made up of oil and gas export revenues, is seen to decrease by looking at the draft budget of 2024.

According to him, inflation is one of the main reasons. Budget revenues have decreased and according to inflation in recent years, the budget has grown.

According to official information, inflation in Azerbaijan has been flat for the past three years. Average annual inflation was recorded at 10.9% in January to September 2023.

Accounting Chamber’s comment on next year’s budget bill of Azerbaijan shows that average annual inflation is forecasted at 5.3% for next year.

Ayhan Kose, the economic vice president of the World Bank, says: If the increase in oil prices continues, this will inevitably mean an increase in food prices. If a serious oil price shock were to occur, inflation would increase high food prices in many developing countries, and by the end of 2022, more than 700 million people – about a tenth of the world’s population – would be undernourished.

The organization is concerned that the escalation of this recent conflict will increase food security risks not only in the region but worldwide.

In the better scenario described by the Bank Globally, global oil supply is expected to decrease between 500,000 and 2 million barrels per day, which is a slight decrease. Each barrel will be variable.

Firoze Nehmadova believes that if the price of oil decreases, it will have a serious impact on Azerbaijan’s income, but in his opinion, the situation is far from dangerous.

This analyst says that based on Azerbaijan’s export statistics, the government is gradually trying to reduce its dependence on the oil industry and focus on the export of gas, the production of other minerals, and the production of petroleum products. focus.

Income from oil sales is decreasing

Farid Mehralizadeh, an economic analyst, says: Azerbaijani people believe that oil revenues do not reach the people, but one of the two payments that they receive salaries and pensions is from the oil and gas budget.

Azerbaijan’s main financial source is the funds collected from the sale of oil and gas to the state oil fund, a part of which is deposited into the state budget every year.

Since January As of October 2023, the revenue from the sale of oil extracted from the Azari-Cheragh-Gonsheli block (AÇG) to the State Oil Fund of Azerbaijan amounted to 5 billion 865.8 million dollars. The revenues of the oil fund from the AÇG project have decreased by 29.5%, equivalent to 2 billion and 460.2 million dollars, compared to January to October 2022. A 15% reduction in the price of oil as well as a reduction of about 14 million barrels of production in the contracted region.

The lowest price of Azari Light brand oil produced in Azerbaijan in the world market is 15.81 US dollars on April 21, 2020 and The peak price was US$149.66 in July 2008.

In Azerbaijan, oil is mainly produced within the framework of the Azari-Cheragh-Gonsheli (AÇG) field development agreement. The share of the State Oil Company of Azerbaijan (SOCAR) in this contract is 25%. on the Republic of Azerbaijan until 2027