The Ministry of Energy of the Republic of Kazakhstan has published a draft order on the abolition of state regulation of fuel and lubricant prices. The decision was prompted by an unprecedented difference in fuel costs with neighbouring countries, which is provoking large-scale illegal export of petroleum products and creating risks for the country's fuel security.
The main reason for the reform is the critical price gap in fuel between Kazakhstan and neighbouring states. Today, a litre of AI-92 in Kazakhstan costs 205 tenge, while in Russia the price reaches 288 tenge, in Kyrgyzstan – 385 tenge, and in Uzbekistan – 489 tenge. A similar situation is observed with diesel fuel: 295 tenge against 355, 427 and 528 tenge respectively.
This gap creates favourable conditions for illegal export, which not only deprives the Kazakh market of necessary fuel volumes but also provokes periodic shortages. The explanatory note to the draft order states that the current pricing system makes Kazakhstan the country with the lowest cost of fuel and lubricants among neighbouring states.
The reform involves a phased transition to market-based pricing. This is necessary for the modernisation of the oil refining industry, which, under regulated prices, cannot attract enough investment for development. Plans include increasing the capacity of oil refineries from 18 to 28 million tonnes per year, which will require significant capital investment.
The Ministry of Energy emphasises the social orientation of the reform. To protect vulnerable segments of the population, the ministry plans to retain existing support measures. Particular attention is paid to agricultural producers, who are promised guaranteed access to diesel fuel at acceptable prices through transparent distribution mechanisms.
The initiative was supported by the Agency for the Protection and Development of Competition. Back in October, its chairman Marat Omarov stated the need to abolish ceiling prices on fuel and lubricants to eliminate the market imbalance.
In the long term, the reform should lead to several important outcomes: Firstly, it will stop the illegal export of fuel abroad. Secondly, attract investment in the modernisation of the industry. Thirdly, create new jobs and increase tax revenue.
Finally, the development of a competitive environment should stimulate improvements in production efficiency and service quality. In this regard, the transition to market-based pricing in Kazakhstan's fuel market appears an inevitable step to address the accumulated problems in the sector.