Azerbaijan to reduce prices of Euro-5 gasoline, boosting local production

From July 15, 2024, consumers in Azerbaijan can expect a decrease in the price of domestically produced AI-95 gasoline, which meets Euro-5 quality standards. The price is set to drop by 40 gapiks to 1.60 manat per litre, a move attributed to current market dynamics as reported by SOCAR, the State Oil Company of the Azerbaijan Republic.

SOCAR's ongoing efforts to modernise and upgrade the Heydar Aliyev Oil Refinery (NEZ) are nearing completion. This initiative aims to bring the refinery's production facilities up to Euro-5 standards, aligning with stringent environmental and quality benchmarks. The construction of new diesel and gasoline production units has concluded, along with the activation of essential plant and technological infrastructure. Consequently, SOCAR's AI-92 and AI-95 gasoline brands have already attained Euro-5 compliance.

Since 2014, Azerbaijan has been reliant on imported EU-95 gasoline, purchased at international prices to meet domestic demand. With the completion of these upgrades, the country anticipates a significant shift towards local production to satisfy its fuel requirements.

Economist Rashad Hasanov, speaking to Azernews, highlighted the potential impacts of this local production milestone on pricing strategies. Hasanov noted the current imbalance between market demand and production capacity. In response, a strategic proposal has been put forth to narrow the price differential between AI-95 and AI-92 fuels. This involves increasing the price of AI-92 while simultaneously reducing the price of AI-95, a tactic aimed at stimulating demand for the higher-quality AI-95 gasoline.

Hasanov emphasised the market's responsiveness to price changes, particularly citing the higher price elasticity of AI-95 gasoline compared to other fuel types. He cautioned that any future price increases could redirect consumer preferences towards AI-95, underscoring the need for a sustainable pricing policy.

"In the medium to long term, the government's goal to promote consumption of superior-quality fuels and mitigate environmental impact necessitates a stable pricing framework," Hasanov concluded.

This strategic shift towards local production of Euro-5 gasoline marks a significant step in Azerbaijan's energy independence and environmental stewardship, aligning with global trends towards cleaner fuels and sustainable development goals. As the nation prepares for these changes, stakeholders are closely monitoring market reactions and regulatory adjustments to ensure a balanced and resilient energy sector for the future.