Prime minister reveals why fuel prices go up in Kazakhstan

Prime Minister Alikhan Smailov supported the fuel price surge as he said that the decision to increase fuel prices was tough but necessary. He also noted that liquefied gas prices may increase as well, as it is necessary to keep liquified gas producers afloat.

“This is a tough decision we should have made. If we had refused to do so, we would face a shortage of fuel,” Smailov said.

He also noted that the authorities have registered a tremendous consumption of fuel within Kazakhstan. However, it is not a secret that the country’s real fuel consumption hasn’t changed and is still quite low. The real cause of fuel shortage is the low price which propels fuel dealers to illegally withdraw tons of fuel from Kazakhstan for resale in neighboring countries.

“The real consumption here in Kazakhstan hasn’t changed much. The government has been doing a lot to increase fuel production. Over the past five years, the production of gasoline and diesel fuel has risen by 70% and 33%, respectively. We produced 5.2 million tons of diesel fuel last year. That was a record high. We have never seen this before,” the prime minister said.

On April 3, Bolat Akchulakov, who at the time was acting energy minister, announced an increase in fuel prices. Thus, Regular-92 gasoline price is going to surge from $0.41 to $0.45 per liter, while the diesel fuel price will surge from $0.51 to $0.65 per liter (11% and 20% increase, respectively).

According to Akchulakov, the government has no choice but to let fuel prices surge to mitigate the price gap with neighboring countries and avoid the shortage of fuel within the country. The move has also been promoted by Kazakhstani officials as the Eurasian Economic Union is eager to create a new single oil products market in 2025.

Two years ago, Aset Magauov, deputy minister of energy, also cited differences in tariffs in Kazakhstan and other EEU member states. For example, excise tariffs and VAT in Kazakhstan are quite lower than in Russia, Uzbekistan and Kyrgyzstan. The government is now trying to make domestic fuel prices about the same level as in neighboring countries and is doing so gradually.

In addition, Smailov hasn’t ruled out that the liquified gas price will surge as well. The official said that the matter is under review by the Anti-Monopoly Agency.

“It is likely that we’ll see liquified gas prices increase because the current prices do not meet reality. We have to allow price surge otherwise liquified gas producers won’t be interested in this business,” the prime minister said.

In January 2022, a sharp price increase for liquified gas, which is a popular fuel among motorists in Kazakhstan, sparked protests across the country and a violent riot in Almaty. At the time, the government wanted to switch to exchange pricing. After the protests, Kazakhstan’s authorities suspended this reform and continued to use administrative regulation of prices.