Could expensive oil to bring down the economy of Belarus?

Ton Norwegian oil more expensive by $130 than a ton of Russian.

Belarusian oil company (BNK) bought a batch of Norwegian Johan Sverdrup oil for delivery in the Lithuanian port of Klaipeda. Out oil by railway will be delivered to Novopolotsk oil refinery. Against this background, Lukashenko made a statement that in the future Belarus plans to buy in Russia, only 30-40% of the country’s needs of oil, reports “Euroradio”.

Whether oil from Norway to become an alternative to Russian supplies? And if it will be much more expensive — will the gasoline at Belarusian gas stations cost as much as Norwegian? For reference: AI-98 there is 1.8 euros. We — 0,85 euros.

How much Belarus has managed the first 80 thousand tonnes of Norwegian oil?

We don’t know the price will have to count. Today a barrel of oil, depending on brand, is trading at $64-65. The market value of tons — slightly more than $ 470. According to the Telegram-channel, $9 per tonne Belarus paid for the shipment in the port of Klaipeda, $40 per ton for delivery to the plant “Naftan”. Plus $1/ton for control of quality and quantity, plus $2/ton for draining the trestles and fix the tanks in the refinery. A total of around $520 per tonne for Norwegian oil.

According to “Belneftekhim”, the price of Russian oil for Belarus is 83% of the world. This means that oil from Russia Belarus cost around $390 per tonne. Ton Norwegian oil for $130 more. This is a very serious difference. Lithuania may pass through the ports 3 million tons of “alternative” oil for the year. Only in Belarus they will “lose” about $400 million well, sovereignty is not cheap!

Will Belarusian refineries with such a cost-effective alternative to oil?

“If the purchase price of the alternative oil market, its supplies to the Belarusian oil refineries are deprived of any economic sense. This has been shown by the experience: were the samples of Venezuelan and Azerbaijani oil — I did it for a year and stopped; there was a single supply and from other countries, such as Iran, also the oil is not flowing at JSC “Naftan” and JSC “Mozyr oil refinery”, — has answered this question the expert of the site

“We do not know the practice to any country except the Russian Federation, or the company sold to Belarus oil cheaper world prices”, — the expert added.

Senior analyst “Alpari” Vadim Iosub assess other people’s calculations are not taken, but agrees: of course, the alternative oil will be more expensive. According to the economist, Belarus work with other suppliers will be challenging, but rewarding experience:

“The presence of more expensive, but alternative sources of oil supply are for the benefit of Belarus from the point of view of reducing Russia’s ability to exert pressure and a position as monopoly supplier of raw materials”.

What will happen to gasoline at the pump?

According to experts, growth of fuel prices cannot be avoided. And it is not only relatively expensive alternative supplies.

“The historical truth of price dynamics in the Belarusian filling stations is a clear and established trend — the cost of fuel is only growing. Please do not take into account tactical “penny” slide, as in the end they still had to recoup the General trend of increasing. Therefore, in the current situation, we have unfortunately to state that depending on the sources of supply of raw materials the prices of fuel at filling stations in Belarus will be in the near foreseeable future to grow”, — says the expert of the site

“Another thing — how will they grow? Given the election year [in 2020 in Belarus’s presidential election. — ed.] unlikely to be any strong one-time jump. Tactics will be the same: a one-time increase of one penny. But this can happen more often than last year. Up to each week,” adds Iosub.

In 2019 the price of automotive fuel increased 28 times. In 2018, one fewer improve — 27.

Vadim Iosub recalls that until 2017 the Belarusian oil refineries could earn on the export of oil and thereby to cover the losses that they received in the domestic market due to the fact that it sold fuel at a relatively low price. Last year’s opportunities to earn on the export considerably decreased. In early January of its fuel abroad, and all were suspended. They were resumed only on January 22.

Could expensive oil to bring down the economy of Belarus?

If Belarus diversifitsirovat delivery at the expense of oil at market prices — how will this affect GDP? According to the Director of the IPM Research center Alexander Chubrik, it’s very hard to predict, because Belarus was not yet a historical precedent of diversification of oil supplies.

“This year we will impact how we buy and process Russian oil. It is clear that the first quarter [2020] these supply cuts will be a failure. Perhaps [GDP] even fall in the first month. And then everything will depend on what terms and volume contract.”

While the Belarusian oil refineries remain underutilized. Estimates of IPM, in 2020 every 10 percentage points decline in production of petroleum will reduce GDP growth about 0.36 p. p.

According to preliminary estimates, in 2019 the GDP grew by only 1.2%. Underutilization of the refinery ⅓ reset this growth, and if the problem will be more serious, will lead GDP to a minus. Agreement on Russian oil supplies to 2020, Minsk is still there.