Factors Influencing the Recent Increase in Petroleum Product Prices in Afghanistan

Kabul – 10/3/1448 AH The prices of petroleum products are not determined solely by domestic market conditions.

Rather, they are directly and indirectly influenced by developments in global markets, crude oil prices, supply and demand, transportation and transit costs, taxes, exchange rates, and other economic factors.

As observed in recent days, the prices of petroleum products and liquefied petroleum gas (LPG) have increased in Afghanistan’s domestic market.

Afghanistan is an import-dependent country when it comes to petroleum products, with a significant portion of its requirements supplied by Russia, Iran, Uzbekistan, Turkmenistan, Azerbaijan, Kazakhstan, and several other countries.

Therefore, any changes in the prices of these products in regional and global markets can directly or indirectly affect the domestic market of Afghanistan.

At present, reduced supply and increased demand in regional and global markets are among the major factors contributing to the rise in petroleum product prices.

Supply and demand play a fundamental role in determining prices; when supply decreases while demand increases, prices naturally tend to rise.

In addition to these factors, reduced petroleum product supplies in source countries, lower exports, and the imposition of export restrictions can also contribute to higher prices.

For example, Russia is one of the world’s major petroleum product exporters.

However, following Ukrainian attacks on a number of refineries and major oil facilities in Russia, as well as reduced operations at some of these facilities, the supply of petroleum products in the Russian domestic market has come under pressure.

In recent days, reports of fuel shortages in Russia have emerged, and the country has begun importing certain petroleum products to meet domestic demand.

At the same time, traders adjust their commercial activities according to market conditions and economic interests.

When petroleum product prices increase in regional and global markets, traders may, based on their economic interests, redirect shipments that were previously destined for Afghanistan to other markets where higher prices can be obtained.

This situation can also be one of the factors contributing to higher petroleum product prices in Afghanistan.

Transportation and transit costs also have a direct impact on the final prices of petroleum products.

Afghanistan imports a significant portion of its petroleum requirements through land transportation.

Therefore, increases in transportation, transit, loading, unloading, and other related costs can affect the final prices of petroleum products in the domestic market.

It is worth noting that an assessment of the situation over the past several months shows that petroleum product prices in global and regional markets had already increased due to the factors mentioned above.

However, the impact of these increases was not as clearly reflected in the Afghan market until recent days.

The main reason was the availability of sufficient quantities of petroleum products in the storage facilities of both the private and state sectors, which enabled a significant portion of domestic market demand to be met from existing stocks.

A notable difference can also be observed when comparing petroleum product prices in Afghanistan with those in a number of Asian countries.

According to the available figures, the price of one liter of petrol in Uzbekistan is approximately AFN 95.3, while diesel is around AFN 81.

In Tajikistan, the price of one liter of petrol is approximately AFN 91.7, while diesel is around AFN 112.66.

At the same time, recent information indicates that fuel markets in Central Asian countries are also being affected by supply constraints and developments in regional markets.

However, comparisons of petroleum product prices between countries should take into account differences in economic conditions, taxation, transportation costs, pricing policies, and the level of government support.

Countries with domestic oil extraction and refining capacities may, in certain cases, provide subsidies and other forms of government support, meaning that domestic petroleum product prices do not necessarily correspond to global or regional market prices.

For example, in Iran and Turkmenistan, domestic petroleum product prices are, in some cases, lower than global and regional market prices.

However, these prices apply to the domestic markets of those countries, while export prices for petroleum products are determined according to supply and demand conditions in regional markets.

The Afghanistan Oil & Gas Corporation, under the General Directorate of State-Owned Companies, is continuously monitoring the petroleum products market in coordination with relevant government institutions and the private sector.

The Corporation is taking the necessary and effective measures to maintain stable supply, meet the country’s petroleum product requirements, and ensure better management and stability of the domestic market.