Galim Khussainov
Inflation and the tengeBankingLending and mortgagesTaxationEconomy and public policyManagement

Economy and public policy · 1 min read

A Fair Price for Gasoline: Parity with Russia

Translated from Russian with the help of AI. Original: Russian version

How recalculating the Russian gasoline price for tax differences yields a fair fuel price for Kazakhstan, and why recent price increases merely reflect higher prices in Russia and a weaker tenge against the ruble.

I recently returned from Russia and naturally noticed the price of gasoline. The cheapest AI-92 gasoline costs 34 rubles per liter, or KZT 185. To convert this into tenge, adjusting for differences in tax components, divide KZT 185 by 1.18 and subtract 41, which gives KZT 116. That is the cost of fuel stripped of Russian taxes. Add Kazakhstan's excise tax of KZT 8 and multiply by 1.12 (VAT), and you get KZT 139. That is the retail price of fuel in Kazakhstan. Delivery, traders' markups and other costs are roughly the same in both countries. One caveat is that in Russia the VAT paid gets tied up and is later refundable from the budget. The procedure for refunding export VAT in Russia is no better than ours, so export prices are usually higher than domestic prices to compensate. All in all, the fair price of fuel in Kazakhstan is in the range of KZT 140–145 per liter. Had the exchange rate not strengthened from 5.6 to 5.42, the price would be 3% higher, or roughly KZT 4–5 more per liter. So the current rise in gasoline prices reflects nothing more than:

  1. A rise in gasoline prices in Russia
  2. A decline in the tenge's exchange rate against the Russian ruble

The whole problem is that we simply have the most opaque, dysfunctional and closed system of oil refining and fuel trading. The industry needs complete reform, which will be very difficult to carry out in current conditions.

In the meantime, so that fuel prices don't come as a surprise, keep an eye on prices in Russia :)

Published in: Facebook, 6 February 2017

More on this topic

Fuel Prices: Why Market Prices Are Fairer

Why cheap fuel makes Kazakhstan neither richer nor more competitive: the country subsidizes its neighbors, loses added value from refining and aviation transit, and bears urban and environmental costs. The case for liberalizing prices, with targeted support for vulnerable groups designed in advance.

The Harvard OPM Reunion in Kazakhstan: The Economic Impact

How a four-day Harvard Business School OPM 64 class reunion in Kazakhstan, attended by just over 90 business owners, affected the economy: at least $5,000–6,000 spent per guest, more than half saying they were now unofficial ambassadors for the country, five or six expressing interest in investing, and talks by the heads of the AIFC and Atameken that dispelled myths about Kazakhstan.

Event Tourism and Car Rental

How Kanye West's concert in Almaty showed the potential of event tourism for Kazakhstan, benefiting mainly SMEs, and why turning short visits into longer, higher-spending stays requires fixes to ground infrastructure, ride-hailing, car rental, parking and payment systems, mapping services, roadside facilities and foreign marketing.