BAKU, Azerbaijan, June 12. In recent years, Azerbaijan has been making significant strides to modernize its oil refining industry - an essential step in the global push towards a green transition. However, despite these efforts, RON 92 gasoline and diesel fuel still dominate the market, hindering the country's progress toward environmental sustainability. One major factor discouraging consumers from switching to more eco-friendly fuels is the low price of RON 92 gasoline, which remains affordable due to its relatively low quality.
The use of RON 92 gasoline and diesel fuel significantly harms the environment. When burned, these fuels release large amounts of harmful substances like nitrogen oxides (NOx), hydrocarbons (HC), and fine particulate matter (PM), which contribute to air pollution and negatively impact public health. According to the World Health Organization (WHO), air pollution causes over 4 million premature deaths each year. Diesel fuel, in particular, is a major source of fine particulate matter that can penetrate deep into the lungs and even enter the bloodstream, leading to cardiovascular and respiratory diseases.
Moreover, RON 95 gasoline offers several advantages over RON 92. It contains fewer impurities and has a higher octane rating, which promotes more complete and efficient combustion. This leads to reduced harmful emissions into the atmosphere. Studies show that using RON 95 can reduce carbon dioxide (CO2) emissions by 10-15 percent compared to RON 92 and decrease NOx and HC emissions by 5-10 percent.
At the same time, by the end of June 2024, the Heydar Aliyev Baku Oil Refinery will start producing automotive gasoline that meets the Euro-5 environmental standard, marking an important step in improving fuel quality. The refinery started producing Euro-5 standard diesel fuel in May 2023. This shift to higher environmental standards will significantly reduce harmful emissions.
Speaking of other examples globally, Germany was one of the first European countries to actively implement programs to improve fuel quality. German gasoline has long met Euro-5 and Euro-6 standards, which require the use of high-octane fuels. In 2011, Germany began promoting E10 gasoline, which contains 10 percent bioethanol, reducing carbon dioxide emissions.
In the US, efforts to improve gasoline quality and phase out low-octane fuels have also advanced. In 2007, the US Congress passed the Renewable Fuel Standard, encouraging the use of biofuels. Japan actively promotes high-octane gasoline and has stopped using gasoline with an octane rating below 95. As part of its strategy to reduce carbon emissions, Japan is also advancing hybrid and electric vehicle technologies.
China stands as one of the world's largest consumers of automotive fuel. In recent years, the nation has been actively tackling the reduction of harmful emissions by enhancing fuel quality. In 2017, China implemented new fuel quality standards on par with European Euro-5 and Euro-6.
These instances shed light on how various countries address the enhancement of gasoline quality and the phase-out of low-octane fuels. This encompasses both legislative measures and market incentives geared toward improving environmental conditions and optimizing the efficiency of automotive fuel usage.
Certainly, environmental protection measures also affect fuel markets. For instance, Fitch Solutions predicts that gasoline prices will face slight upward pressure in the coming years. This is due to increased expenses related to higher quality standards and environmental regulations. However, this impact will be softened by advancements in fuel efficiency and the gradual shift towards electric vehicles, which could slow down overall demand growth.
BMI Research highlights that gasoline prices will vary significantly by region. Developed markets may experience higher prices due to stringent environmental regulations and higher production costs, whereas emerging markets may see slower price increases as they balance economic growth with fuel accessibility.
So, while gasoline prices are expected to stay relatively steady worldwide, regional disparities and specific market conditions will bring about changes in pricing trends. Key factors include crude oil prices, legislative shifts, technological advancements, and the ongoing transition to alternative energy sources.
Currently, there's a swift global move towards electric vehicles, which stands as a pivotal part of the shift towards cleaner fuel options.
As per the International Energy Agency's (IEA) forecasts, global electric vehicle sales could hit 17 million units by 2024, compared to the 14 million sold worldwide in 2023 (a 35-percent increase from 2022).
The IEA foresees that, by 2020, every third car on China's roads will be electric, and in the US and EU - every fifth.
Competition and innovation will drive down the cost of electric vehicles globally, paving the way for increased sales, the agency expects. Regarding electric vehicle charging infrastructure, its global production surged by 40 percent in 2023 compared to 2022. According to the IEA, by 2035, there will be six times as many charging stations worldwide as there were in 2023.
In Azerbaijan, efforts have been underway for several years to incentivize the adoption of environmentally friendly vehicles, particularly those with electric or hybrid engines. Tax and customs incentives are applied to such vehicles and their charging equipment. This initiative has led and will continue to lead to a rise in the import of such vehicles into the country.
According to the State Customs Committee of Azerbaijan, the country's import of electric vehicles from January through April 2024 totaled 1,012 units, compared to 568 units for the same period last year, marking a 1.8-fold increase year-on-year. The import of hybrid cars amounted to 5,111 units, up more than 14 percent year-on-year (4,474 units in the same period last year). In 2023, the country imported 3,102 hybrid cars and 14,098 electric cars, compared to 486 and 11,337 units respectively in 2022.
If this positive trend persists, the share of electric vehicles in the country's vehicle fleet will significantly rise in the coming years.
Alongside the growing number of electric vehicles, more charging stations are also being installed.
In March this year, President Ilham Aliyev issued a directive to promote the use of electric vehicles. According to the decree, Azerishiq OJSC continues its efforts in this direction. Ahead of COP29, necessary charging infrastructure is being set up in both the capital and regions of the country, ensuring a stable supply of electricity.
These charging stations are powered by green energy. Installed by Azerishiq OJSC, these stations boast high capacity and provide electric vehicles with quality electric power quickly and reliably.
From March through May 2024, installation works were completed in the capital at the Training and Innovation Center of Azerishiq OJSC, as well as at the "Icherisheher" and "Sea Breeze-1" substations with capacities of 110/35 kV. These substations are located in the settlement of Nardaran, Sabunchu district, and at a trading enterprise along the Gala-Mardakan road.
In the regions of the country, charging stations were installed at various locations, including the "Gadzhialyly" substation in Gabala, the 71st kilometer of the Alat-Astara road in Salyan, and in six sites across Karabakh and Eastern Zangazur. Additionally, they were set up in the centers of digital power grid management in Zangilan and Jabrayil, at the "Khojaly" and "Shusha-1" substations, the "Fuzuli" digital substation, and at the nodal substation "Hadrut". This initiative will continue both in the capital and across the regions.
In Azerbaijan, where 2024 has been declared the "Green World Solidarity Year", significant strides are being made in developing alternative energy sources. The installation of charging stations in Karabakh and Eastern Zangazur, earmarked to become green energy zones, is a continuation of these efforts. Embracing alternative energy sources and the increasing interest in electric vehicles will undoubtedly have a positive impact on Azerbaijan's ecosystem, particularly in Karabakh and Eastern Zangazur.
Thus, for Azerbaijan's successful green transition, there's a need to enhance the quality of RON 92 gasoline. This would incentivize a shift towards more environmentally friendly fuels like RON 95 and significantly reduce air pollution levels.
As of April 29, 2024, Azerbaijan stands among the countries with the most affordable gasoline prices. According to data from the Global Petrol Prices portal, gasoline costs $0.588 per liter in Azerbaijan. Azerbaijan's inclusion in the top countries with the cheapest gasoline, alongside Libya, Venezuela, Egypt, and others, underscores the importance of seizing this economic opportunity to improve fuel quality.
Examples from other countries show that raising fuel quality standards can result in a certain price increase. For instance, in Germany, the introduction of Euro-5 and Euro-6 standards led to higher gasoline prices, but it also significantly improved the environmental situation. Similar measures in Norway and Sweden resulted in price hikes but also reduced harmful emissions and encouraged the use of alternative energy sources.
Implementing stricter gasoline quality standards in Azerbaijan could lead to long-term economic and environmental benefits, despite the initial cost increase. This strategic change would not only help enhance air quality and public health but also hasten the shift to more sustainable and clean energy sources, in line with global trends and commitments to carbon emission reduction.