Bajatovic Says Gas Price to Go On Dropping by Mid-2017

Dusan Bajatovic (Photo: mc.rs)

In January, the oil price was USD 27 per barrel only to reach USD 45 per barrel five months later, this price rise being triggered by the developments in the world market including the possibility of the US decreasing its oil production, disruptions in oil supply and forecasts about a great drop in oil production in non-OPEC countries. While oil companies are already ‘rubbing their hands’ because the current situation could result in higher retail prices as well, overshadowed by the oil price rise the gas price could also go up but according to the ‘oil formula’ and with a delayed nine-month effect. Will such trends affect Serbia?

If the ‘oil formula’ is applied, the oil price set in May could be felt in the domestic market no sooner than in nine months’ time, this being the expected relevant time, which means that the world market turbulence would reflect on it no sooner than in the spring of 2017, once the heating season is over.

Bajatovic, Srbijagas general manager, told the N1 television that a former drop in the oil price due to the ‘oil formula’ still affected the current gas prices, which he described as low and competitive.

“As for the gas price in dollars, it is bound to go down until the last quarter of 2016 and the first quarter of 2017, which is definitely good news. I do not expect such inflation-related developments in our market, the value of the dollar will almost certainly change against the value of the euro, which could result in the gas price adjustment but not to the extent that we would not have a permanent drop in the price practically until the first half of 2017, which is good news for consumers”, he said.

He said that the world companies’ expectations for the three-year period commencing in 2015 were that the oil price would be USD 50 per barrel, adding however that, should the expectations be exceeded, the gas price would go up in proportion to that. Consequently, if the oil price is USD 50 per barrel, 1,000 cubic metres of gas would cost USD 170. Should the oil price reach USD 60 per barrel, the price of 1,000 cubic metres of gas would reach USD 200, with the worst scenario being the price of 1,000 cubic metres of gas reaching USD 230, should the oil price rise to USD 70 per barrel.

“We depend on imports, what is imported must be paid for,” Vojislav Vuletic of the Gas Association said, while a higher price of the ‘blue fuel’ in the world would result in higher import prices.

“We want a market economy and the market economy rule is that anything with a price must be paid for. Consequently, if Srbijagas pays more for gas, it will have to sell it at a higher price, it is as simple as that. Unlike some countries in the region such as Croatia and Romania, which have at least 50-60 percent of domestic production thanks to which they can set the gas price in a way, we do not have that. We import almost 90 percent of gas, we have to pay to Russians the said 90 percent, which means that this is the amount we have to collect at home, Vuletic underlined.

He also added that neither the oil price nor the gas price were always exclusively the result of market relations but also of a series of non-market reasons, in the process of which politics plays an almost decisive role.