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Russia To Raise Gas Prices For CIS States
Moscow, Russia (RIA Novosti) Nov 14, 2006 The majority of the former Soviet countries are almost entirely dependent on energy supplies from Russia. Meanwhile, political realities and current trends on the global energy market do not make a fall in gas prices very likely. Russia's fuel and energy sector accounted for 40.5% of the country's exports to the Commonwealth of Independent States (CIS) in 2005, an increase of 10.7% on 2004 in money terms. Until recently, prices for these deliveries were clearly influenced by politics. It was argued that the Kremlin kept the CIS states inside its political and economic sphere of influence by selling fuel, primarily gas, to them at below-market rates. But this is not true of Ukraine, for one. Russia actually subsidized Ukrainian industries that were competing for a foothold on the global market. Conversion from a politicized barter scheme to market pricing in the gas sector has increased prices for all neighboring states, although politics still influences gas prices in the CIS. For example, the improvement in relations with Ukraine and agreements on Russian participation in crucial spheres of the Ukrainian economy lowered the price it will pay for gas in 2007 to $130 per 1,000 cubic meters, whereas the ongoing conflict with Georgia has prompted the Kremlin to raise its price from $110 to $230. Gas prices in different CIS countries vary widely, from $130 for Ukraine and $170 for Moldova to $200 for Belarus. Prices for Latvia have not yet been determined (a possible price is $217). East European countries pay considerably more for Russian gas - Romania is buying it at $285 and Bulgaria at $275. Increasing gas prices will have an adverse effect on CIS economies as soon as next year. The International Monetary Fund predicts a decline in GDP growth in many of them. Higher gas prices are also contributing to inflation. According to preliminary estimates, year-end inflation in Ukraine could reach 11.5-12%. IMF experts predict that Uzbekistan will have the highest year-end inflation in the CIS, at 19.3%. Georgia may keep it at 10% thanks to a tight fiscal and monetary policy, but it will most likely grow next year when gas prices soar. Inflation in Moldova is expected to reach 11.5%. Under these circumstances, the consumers of Russian gas are looking for ways to convince Russia to keep prices down. The European price of imported gas, including from Russia, is calculated using a formula based on crude-oil prices. After an insignificant decrease on the global market, oil prices surged on November 9, due to the announced depletion of U.S. oil reserves and the forthcoming cuts in oil production by OPEC countries. Short-term price fluctuations, however, are not a sufficient reason for a hasty revision of gas prices. The CIS countries prefer to sign long-term contracts for gas supply at fixed prices with energy giant Gazprom. In this case, gas prices should be calculated taking into account long-term forecasts for oil prices. Experts do not expect oil prices to slump. The International Energy Agency has upwardly revised its oil-price forecast for 2030 by 40%, from $65 per barrel in its 2005 forecast to $97.3. (Using 2005 prices, oil in real terms is seen at $55 per bbl, 40% higher than in its previous report). The figures are provided in the World Energy Outlook 2006, published by the IEA on November 8. According to the Reference Scenario, global energy demand will grow 53% by 2030. However, gas prices will grow more slowly than oil prices. The agency increased its forecast for the price of imported gas in Europe by 16%, to $234.8 per 1,000 cubic meters. This seems to be the only relatively good news for consumer countries. In other words, gas prices are an important issue for bilateral discussions. For example, gas prices for transit countries are linked to transit tariffs. Ukraine has kept its tariff for Gazprom low, at $1.6 for the transit of 1,000 cubic meters a distance of 100 km. But Moldova demands $2.5, which is an average European transit tariff. This is despite the fact that Gazprom intends to supply gas to Moldova at $170 per 1,000 cubic meters, which is considerably below the average European price. Igor Tomberg, PhD (Economics), is a senior research fellow at the Center for Energy Studies, Institute of World Economy and International Relations, Russian Academy of Sciences. The opinions expressed in this article are those of the author and may not necessarily represent the opinions of the editorial board.
Source: RIA Novosti Community Email This Article Comment On This Article Related Links Commonwealth of Independent States Powering The World in the 21st Century at Energy-Daily.com Powering The World in the 21st Century at Energy-Daily.com
Republicans Eye Alternate Drilling Bill
Washington (UPI) Nov 13, 2006U.S. House Republicans have said they will settle for a more modest offshore drilling bill after Democratic victories effectively killed a previous plan. U.S. Rep. John Peterson, R-Pa., said he would push more a smaller measure that allows for a small amount of offshore exploration, similar to a bill passed by the U.S. Senate, The New York Times reported Monday. |
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