Gasoline and diesel problems reflect general problems of the Kazakh economy. Aidarkhan Kusainov, famous economy observer explains, in layman’s terms, why Kazakhstan shall never have a new refinery, while cheap gasoline shall remain one source of social and economic problems.

In his telegram-channel, Mr. Kusainov paints us a drawing of the logic behind the fuel price generation in Kazakhstan. Literal translation below:

Conspiracy of Power and Companies

“Gasoline and diesel fuel in Kazakhstan are cheap – for them to be available. They are cheap, because oil and gas companies have obligation to deliver crude oil to domestic market, regardless the global prices.  That is how the raw material is kept cheap and why the economy of oil and gas companies remains bad. 

Why They Won’t Build a New Refinery?

Why would they build a new refinery: invest money in a new enterprise, the prices for products of which shall be regulated by state, so to keep them as low, as possible, compared to neighboring countries?

Are oil and gas companies interested in that? Not for toffee. A new refinery implies new obligations to deliver oil to domestic market and thus act to detriment of own economic situation.

Will they build a new refinery? Probably, yes – if the government pays them for cheaper oil and pays investors for their work – in other words, if the government covers losses.

Kazakh Oil Not For Kazakhstan

Kashagan, Karachagank and Tengiz are growing fields, owned by foreign companies. Those fields are liberated from requirement to deliver oil to domestic market, and their economic picture if normal. Those our companies, for example Ozenmunaygas, that must maintain domestic supplies. Those companies already are in bad situation with their economics, and, to make things worse, the state takes away their crude. 

We need to have lower prices. Oil refiners say that that is nor problem, and all they need is cheap crude. Oil producers have their own considerations, that discourage them from selling for cheap prices. In the result of that, our refining sector is not developing. Neither does our producing sector. This is absurdity.

A significant part of the real sector of economy works only because the government pays companies in the real sector of economy. 

That is done directly – through profitability of the companies controlled by state, or it is done indirectly – be means of quasi-taxes imposed on domestic companies operating in juicy sectors. So, why at all demand profitability and effectiveness from companies under control? Interesting is the evolution of discussions about the new refinery. How will a supposed future plant decrease prices, when the prices already are lower than those in neighboring countries? For some reasons, our “public collective mind” concludes that a new plant producing new products is something like a magical formula – you say something and you get cheap goods and pay salaries and taxes, our of nowhere.”