Kazakhstan Plans to End State Regulation of Fuel Prices
Kazakhstan's Ministry of Energy is considering the phased liberalization of gasoline and diesel fuel prices as part of a broader reform aimed at addressing price disparities with neighboring countries and curbing illegal fuel exports. The proposed changes have been outlined in a draft document published on the Open NAP portal. The reform would gradually shift fuel pricing from state regulation to a market-based system. Since May 2024, Kazakhstan has implemented a differentiated pricing mechanism, but the Ministry of Energy acknowledges that state regulation has made Kazakhstan the country with the lowest fuel prices in the region. This disparity has incentivized “gray” fuel exports - illegal cross-border sales - and contributed to domestic shortages of petroleum products. Currently, a liter of AI-92 gasoline in Kazakhstan costs 205 KZT ($0.39), significantly cheaper than in neighboring countries: Russia: 288 KZT ($0.54) Kyrgyzstan: 385 KZT ($0.72) Uzbekistan: 489 KZT ($0.92) The price gap is similarly wide for diesel fuel: Kazakhstan: 295 KZT ($0.56) Russia: 355 KZT ($0.67) Kyrgyzstan: 427 KZT ($0.80) Uzbekistan: 528 KZT ($0.90) Price differences for gasoline range from 40% to 138%, while for diesel fuel the gap is between 20% and 79%. The Ministry of Energy emphasizes that this price liberalization is crucial for addressing the challenges caused by these discrepancies. According to the Ministry, the reform will help: Prevent illegal fuel exports. Ensure the economic viability of oil production projects. Enable expansion of refinery capacity from 18 million to 28 million tons per year. The modernization of the oil refining sector, spurred by market-based pricing, would also create new jobs and provide additional funding for government programs. “Phased liberalization of prices with priority support for socially vulnerable segments of the population is necessary. It will create a sustainable system for supplying the domestic market and ensure economic feasibility,” the Ministry’s explanatory note states. The Ministry has assured the public that the transition to market pricing will be gradual and carefully managed to avoid sharp or sudden price increases. Authorities also promise strengthened oversight of the fuel and lubricants market to ensure uninterrupted supply and compliance with legal standards. Agricultural producers, a key sector reliant on affordable fuel, will retain access to subsidized pricing under transparent mechanisms. Additionally, the government has pledged to implement social support measures to protect low-income and vulnerable populations from the financial impact of rising fuel prices. “Liberalization will ensure predictability of changes and create conditions for modernization of the industry. Social support will be prioritized, and agricultural producers will continue to benefit from structured access to fuel,” the Ministry emphasized. Kazakhstan’s plan to phase out state regulation of fuel prices marks a significant shift in the country’s energy policy. By transitioning to market pricing, the government aims to address long-standing challenges, including illegal exports and underinvestment in refinery modernization, while also ensuring social protections for vulnerable groups. The success of this reform will depend on how effectively the government balances economic modernization with public concerns over rising fuel costs.
2 days ago