Oil prices drop can adversely affect economy of Kazakhstan, expert says

Oil prices drop can adversely affect economy of Kazakhstan, expert says

Baku, Azerbaijan, Nov.28

By Elena Kosolapova - Trend:

After the OPEC countries decided not to reduce the quota for oil production, a further drop in oil prices can adversely affect the economy of Kazakhstan, the expert of the Institute of Political Solutions of Kazakhstan Sergey Smirnov told Trend.

"Kazakhstan's economy is based on selling raw materials - oil and metals," he said. "If the prices for raw materials reduce, therefore, revenues will also drop. First of all it will affect the state employees, and we will have to cut social programs. This may cause a delay in the increase of wages, rise of inflation."

Smirnov said that Kazakh President Nursultan Nazarbayev has already given the order to use the funds of the National Fund for economic development.

But if the average price is below $80 per barrel, it may be needed to additionally borrow savings from the National Fund, according to expert.

He recalled that the prime cost of oil production in Kazakhstan is quite high. In October, the First Deputy Energy Minister of Kazakhstan Uzakbay Karabalin said that the prime cost is around $50 per barrel.

"And it is not taking into account the transportation, but it is necessary not only to produce oil, but also to send it to the markets," said Smirnov. "If the low prices remain, the cost of production and transportation of oil (in Kazakhstan) will be equal to the cost of oil."

In Saudi Arabia, oil production prime cost is low, and they can afford to hold the prices at $70 for a year, said the expert.

But in general, the impact of low oil prices on the economy of Kazakhstan depends on how long they will remain at this level, Smirnov said.

"It is quite possible that in the next year OPEC will agree to cut production volumes," he said.
"If the prices begin to rise by spring 2015, nothing bad will happen then."

The expert said that oil prices can fall to $70 a barrel, but then they will grow. At the same time, he said that it is difficult to predict for how long oil prices will remain low, because no one can clearly explain the reasons for their fall.

"It is clear that supply exceeds demand, so prices fall," said Smirnov. "But why does it exceed the demand? Someone said that it is the result of actions of the Americans who want to affect the Russian economy, trying to repeat the 80s. Or maybe it's the influence of the United Arab Emirates, who want to eliminate a competitor in the form of US shale oil. The US increased production by 6 times at the expense of shale oil, and thus competes with Saudi Arabia."

He said that the threshold of profitability of shale oil is at $80 per barrel. Therefore, if low oil prices remain yet for another year, many shale projects in the US will have to be closed due to unprofitability.

This is while Saudi Arabia can afford to sell oil at $70 per barrel as well by taking into account its low prime cost, the expert added.

Smirnov added that currently, it is important for Kazakhstan to diversify its economy and develop the non-oil sector in order not to depend on oil prices.

He said the new economic policy declared by Kazakh president envisages these measures.

However, the diversification of economy and the development of infrastructure were among the issues discussed during the crisis of 2008 as well.

"But none of this happened. Last time the intentions were forgotten as soon as the crisis ended," said the expert.

However, this time the impact of the crisis can be more noticeable, since the period of low oil prices can be protracted.

On Nov.27, OPEC member countries during the meeting in Vienna decided to maintain oil production quota unchanged at the level of 30 million barrels per day.

For any questions or feedback, follow the author on Twitter: @E_Kosolapova

Loan expenses of travel companies to be compensated in Uzbekistan
Loan expenses of travel companies to be compensated in Uzbekistan
G20 tourism ministers agree to maximize travel sector's contribution to economy
G20 tourism ministers agree to maximize travel sector's contribution to economy
Uzbekistan’s Zaamin to be 4-season touristic hot spot with Turkish company's project
Uzbekistan’s Zaamin to be 4-season touristic hot spot with Turkish company's project
Loading Bars
Latest
President Ilham Aliyev: Azerbaijani Army liberated Minjivan settlement and 13 villages of Zangilan district
Armenia once again betrays Russia
President Ilham Aliyev: Azerbaijani Army liberates 3 villages of Fuzuli district, 5 villages of Jabrayil district
Armenian side forced to recognize Azerbaijani army’s superiority - Defense Ministry
Armenia's defensive system, military equipment and terrorists didn't help - Azerbaijan's MoD
Liberation of Zangilan to increase production and export of Azerbaijan's mineral resources
Morocco's import of Turkey's jewelry, precious stones drops
Turkey's export of jewelry, precious stones to Iran decreases - Trade Ministry
Armenia has no interest in peaceful settlement of Karabakh conflict - top official
France reduces imports of jewelry, precious stones from Turkey
Georgia's import of Turkey's jewelry, precious stones down for 9M2020
Car prices in Iran drop
Iraq likely to unblock Iran's assets
Iran continues to increase non-oil exports
Supplies of jewelry from Turkey to Iraqi market decline in 9M2020
Dissemination of inaccurate info by some websites not to affect Qatar-Azerbaijan relations - embassy
Kazakhstan’s ERG Service to establish foundry products export to Uzbekistan
Turkish jewelry supplies to Azerbaijani market plunge
No diplomatic way to resolve Karabakh conflict, admits Armenian PM
Georgia implementing new project to provide remote villages with internet
Actual revenues to Azerbaijan's budget from State Customs Service top forecast
SOCAR details plans for expanding gas distribution network in Georgia
Iranian Energy Exchange announces products to be on sale October 24
Compound feed producing plant to be commissioned in Almaty
Most Azerbaijani monuments in occupied territories Armenianized or destroyed
Georgia reveals TOP 5 banks with highest interest on loans
Uzbekistan reveals growth rate of investments spent in fixed assets for 9M2020
China's import of jewelry, precious stones from Turkey slumps
EU leaders to hold COVID-19 video-conference October 29
Iran's Persian Gulf Star Oil Company boosts its exports
Turkey increases export of jewelry to US - Ministry of Trade
Transfers by Azerbaijan's State Oil Fund to state budget for 9M2020 revealed
Union of Importers of Oil Products of Georgia talks adoption of new standard for diesel fuel
Subsidies for agriculture dev't allocated in Kazakhstan's Almaty region
Price of mobile internet down in Georgia
Data on sales in foreign currency at Turkmenistan’s exchange in September
Bahar Azadi gold coin price continues to fall in Iran
Fitch Ratings notes Georgia’s ability to comfortably meet its funding needs
Volume of paid salaries decreases in Georgia
Germany's 9M2020 import of Turkish jewelry shrinks
President Ilham Aliyev interviewed by Japan’s Nikkei newspaper (PHOTO)
Azerbaijan, Russia enhancing bilateral co-op on innovative dev't, digital economy
Uzbekistan resumes flights to UAE's Sharjah
Eni sets timeframe for wind farm construction in Kazakhstan
Azerbaijan itself implementing UN Security Council resolutions
Azerbaijan reveals state budget revenues, expenditures for 9M2020
Students of Baku Higher Oil School donate their scholarship allowances to Armed Forces Assistance Fund
Amount of investments made to launch of enterprises in Iran increases
Uzbekistan suspends gold export
Khazar Consortium opens tender for purchase of fire-fighting equipment
Georgia's import of tubes, pipes, hollow profiles from Turkey up
Three more UAVs of Armenia destroyed
Ambassador of Mexico met with Executive Director of SOFAZ
Russian entrepreneurs, well-known arm dealers involved in arming Armenia - President Aliyev
Uzbekistan considers state budget for 2021 taking into account COVID-19
Exports of knitwear from Georgia to Turkey down
Armenia creating suicide squads consisting of prisoners sentenced to death
UAE increases exports to Kazakhstan amid COVID-19
Chevron expresses will for further co-op with Kazakhstan in energy sector
Azerbaijani agency joins int'l public-private partnership association
Azerbaijani, Russian FMs meet
Exports of furniture, wood from Turkey to Turkmenistan increased
Nasdaq profit surges 76% on non-trading business strength
Georgian air company Air Georgia implements new project with United Arab Emirates
Weighted average rental rates reduce on Georgian main high streets
Azerbaijan's victory in Karabakh conflict beneficial to all parties, Russian expert says
Azerbaijan to build power supply stations in deoccupied districts
Geostat reveals volume of ferroalloys exported by Georgia to Turkey
EAEU reveals export of Turkmen vehicles
Georgia sees increase in export of flours, meals, pellets to Turkey
Operating performance of financial institutions improves in Georgia
Georgia reduces import of medicaments from Turkey
Wood, furniture exports from Turkey to Ukraine decline
Iran reveals its COVID-19 data for October 21
We drove Armenian army out of our lands so fast that they fling up their heels - President Aliyev
Azerbaijan confirms 176 more COVID-19 recoveries
Military equipment abandoned by Armenian army on battlefield (PHOTO / VIDEO)
President Ilham Aliyev on possibility of observers introduction
At the last moment Armenian refused to return Kalbajar and Lachin, says president of Azerbaijan
Iran restarts extraction from Sulabdar oil field
Azerbaijan reaffirms position on Lachin corridor which is part of fundamental principles - President Aliyev
President Aliyev says no country helping Azerbaijan in fight with Armenia
If Armenian side says it is ready to withdraw troops from occupied territories, issue of so-called observers can be considered - President Aliyev
Azerbaijan wants peace, also territories that rightfully belong to it - President Aliyev
Full responsibility for what is happening now lies squarely with Pashinyan, says Azerbaijani president
We are offered to make concession to Armenia, unilateral concession, while nothing being offered in return - President Aliyev
Azerbaijan ready to suspend military operations, resolve issue at negotiating table - President Aliyev
Armenia’s terrorist authorities must be punished – Azerbaijani MP (VIDEO)
Georgia, UK aim to strengthen business and commercial ties
Volume of market services in Uzbekistan’s transport sector remains predominant despite decrease
Azerbaijan to issue support for children who lost parents after Armenia's Ganja attack (PHOTO)
Turkey raised wood, furniture exports to Russia - Trade Ministry
Heads of Christian religious communities of Azerbaijan protest against draft resolution submitted to US Congress
TANAP named Project of the Year by US-based PMI
Eni Turkmenistan Limited opens tender related to data transmission services
Tajikistan's import of Turkish furniture down
Demand for Azerbaijani CBA's short-term notes exceeds supply
Value of goods exported from Iran's Sistan and Baluchestan Province revealed
Turkic Council condemns Armenia's attacks on populated areas, civilians in Azerbaijan
Azerbaijani ASB Bank's 3Q2020 assets down
All news