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Oil Prices on Global Market Plunge, Profits Margin of Georgian Oil Importers Rises

The global stock exchanges are sharply declining in Asia, Near East, Europe and Russia. At the same time, oil prices are falling worldwide.

The global tendencies have not much affected the Georgian fuel prices. Supposedly, we should not expect such an affect at all, because Georgian importers follow an iron argument for many years. Fuel importers assert they have purchased fuel reserves at high prices in advance and therefore fuel prices cannot be cheapened considerably, while the contraction in oil prices have influenced fuel prices in almost all countries.

The association of young financiers and businessmen (AYFB) appraises the current contraction in fuel prices as inadequate amid a significant downturn in oil prices on the international market.

The oil prices are declining on the global market and seeing the 7 year’s bottom, AYFB analyst Paata Bairakhtari said. At the last NYMEX trade session the barrel’s price dropped 2.23 USD to 38.06 USD. Similar contraction was last recorded in 2009.

Bairakhtari explains several factors have preconditioned a contraction in oil prices on the global market. Removing sanctions from Iran is one of the similar preconditions. To maintain their stakes on the global oil market, OPEC member countries have to increase the extraction volume, but extraction costs differ in every country and some countries have to sell crude oil at unfavorable tariffs. Currently, Saudi Arabia is considered a major oil extractor country worldwide, Bairakhtari said.

As to the Georgian market, amid the global market developments, changes have taken place on the Georgian fuel market too. For the last month oil companies have lowered tariffs by 0.03 to 0.05 GEL. But AYFB says this contraction is questionable amid the global factors. According to the AYFB analysis, for the last month oil prices on the global market have slipped 22.44%, while the contraction in Georgia does not exceed 2.5%.

“Oil prices are demonstrating a downturn trend for the last two months. In details, in July oil prices on the global market declined by 23.3% compared to June. Despite similar plunge, no oil importer company has lowered fuel prices in Georgia in July. For example, in the USA the price of a liter of Regular petrol has shrunk to 0.62 USD that is 1.46 GEL under the current exchange rate.

Naturally, we should also take into account the recent depreciation of the GEL exchange rate. Despite this fact the fuel prices remain still inadequate, because the GEL rate depreciated by only 5.08% for the last 2 months, while the oil prices on the global market have shrunk by 45.74% for the last 3 months”, AYFB analyst Paata Bairakhtari noted.

Along with a plunge in oil prices, the international oil products prices are also decreasing under the Platt on which fuel prices depend in Georgia. Namely, today international petrol price under the Platt makes up 481.75 USD per ton, while the price of 10PPM diesel is 431 USD per ton.

These indicators demonstrate today the price of a ton of petrol is about 1130 GEL, while the retail price is 1.95 GEL. We should recall the retail price per liter was 2 GEL amid the historical maximum of fuel prices, when the price of a ton of petrol was 1070 USD, that is 1800 GEL according to the that period’s exchange rate. According to these indicators, today companies receive much higher profits than amid the historical maximum of  fuel prices.