The prices continue declining at the world oil market for three months running. By the end of June 2014 maximum Brent oil price was $115 per barrel, but today its price is already $97.00.
“Azerbaijan is the oil exporting country and the share of crude oil export in the total export of the country constitutes 86% and it is very vulnerable to change of oil prices at the world market,” said Ilham Shaban, chief of the Centre for Oil Studies Caspian Barrel.
He said oil price decline could bring nothing good to Azerbaijan at present and in the future, because oil production also declines in the country.
With these two factors together, the country’s incomes go down faster, than it was expected, said the same source.
Shaban believes that continuation of oil price decline at the world market will force the Azerbaijani government to reduce costs of the state budget
“The active phase of investments into the gas projects of Azerbaijan will begin in 2015. Part of these funds will be invested from the State Oil Fund (SOFAZ). Azerbaijan will not stop funding these projects, because they are of strategic importance for the country. On the other hand, SOFAZ is the biggest donor of the state budget. Almost half of the state budget’s costs are funded from SOFAZ. When oil price goes down and export volume declines, the earnings to the Fund decrease as well. In this situation the country cannot spend as it used to before. This means that costs of the state budget will have to be reduced,” expert said.
This is usual for the countries dependent on the oil export, he added.
Asked why the same thing did not happen in 2009, when the oil prices went down, Shaban said that time oil production went up in Azerbaijan and oil prices went up from December 2008.
Head of the Centre for Oil Studies found it difficult to more any forecasts.
“Oil prices went down during a very short period of time and we do not know when this process is going to stop and oil prices will stabilize,” he added.
* Share of oil in the Azerbaijan state budget revenues, including transfers from the Oil Fund, reaches about 75%.
