The Cabinet announced the possibility of paying subsidies for rising fuel prices of 20 euros per month, with the basic price of gasoline and diesel expected to remain around 1.60 euros per liter, and citizens' incomes to average 652 euros.
On the topic of oil price movements, Eng. Nikolay Kacharov, head of energy companies in Europe and the Middle East, who has many years of experience in the sector, commented.
"There are two effects. The first effect is a reduction in supplies. I'm not talking about production, there is more of a logistical problem with the passage through Ormus. But there is also a panic effect, of course, the markets are watching carefully, but as always in the case of a deficit of such a structural raw material as oil, there is also a certain haste on the part of all traders, all operators, so these effects multiply“, explained Kacharov.
According to him, about 20% of the world's oil passes through the strait, which is currently blocked.
“There are installations that are bombed by both sides, both in Iraq and in oil producers, the main producers in the Middle East. So there is also a certain reduction in the amount of production, but I would say that the stronger effect is the logistical effect. There is production, but it cannot simply reach consumers and markets," he added.
The expert also commented on Iran's new law, which collects fees from ships passing through the Strait of Hormuz: “This will not be positive in any case, because although logistics can be gradually unblocked by paying fees, the price that must be paid for this passage will first be increased. I have no idea at the moment how this price will be determined by Iran and whether Iran has the right to build such barriers.“
As for the effect on the end user, Eng. Kacharov explained: “The first area is the direct use of oil. Every $10 increase in the brand, in the international price, in the market price of crude oil, should have an impact of 10-15 cents on the end user per column. That is. from $65 per brand to $115 today, this is almost a doubling of the price at this time of crisis. Today, you should be paying about 60 cents more.“
He specified that about half of the price for the end user is due to excise taxes and refinery costs. “That is, half of the price for the end user is due to the price of crude oil”, he added.
Regarding the fuel subsidy, Kacharov pointed out: “It is a subsidy that can have different forms. As I have already said, a fairly large part of the price of oil for the end user is excise taxes for the state. That is, the state can waive these excise taxes and automatically regulate the price downwards. But this means that this money will not go into the budget. They have to be found in other ways.“
He also warned of the broader effects on the economy: “Plus, don't forget that oil is just the first blow. After that, everything will become more expensive, for the simple reason that practically all products on the market, whatever they are, are transformed energy. Inflation will be a fact.“