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Oil prices, so fickle and ever-fluctuating, agitated the world economic community again, pushing down the "technical support" of $ 100 for a barrel of fuel. Experts and representatives of many oil-producing countries have already expressed some concern over the situation, but do not hurry to resort to concrete measures. Azerbaijan sees no need to revise the state budget for the current year, where the price of oil is set at $ 100 per barrel. In any case, according to respected analysts, even in the worst case scenario, the price of oil should not be less than $ 60 over the next 20 years.

The budget is unshakeable

The fall in the price of oil for "black gold" by a couple of dollars a barrel was one of the main topics of analytical predictions of recent weeks. Experts carefully began to say that the trend may continue in the near future due to the increase in oil production in the United States - to 7.21 million barrels per day (a record level in the last 20 years) owing to shale deposits. At the same time, the oil reserves in the US are also close to historic highs - 387.6 million barrels. The next meeting of OPEC is scheduled for 31 May, but analysts tend to assume that if the price of $ 92-96 per barrel dominates for a while, the cartel is most likely to schedule an emergency meeting and discuss the possibility of reducing oil production quotas.

For Azerbaijan, these price fluctuations on fuel markets are undesirable not least because the price of oil in the state budget of 2013 is set at $ 100 per barrel, while the state treasury, according to this year's predictions, is almost 60 per cent dependent on the oil sector. Nevertheless, the head of the Department of Economic Policy at the Azerbaijani Presidential Administra-tion, Mayil Rahimov, said that there is no need to adjust the targets of the 2013 budget. "In the recent period, the price of oil has fallen on the world market. But so far, the prices have been above $ 100, so we do not expect difficulties due to lower prices. And there is no need to revise the targets of the budget," he said.

Rahimov's optimistic mood is shared by the CEO of the State Oil Fund (SOFAR), Sahmar Movsumov, who predicted that the amount of the Fund's assets by the end of 2013 will remain at the same level as last year. "If the price of oil on world markets does not change, we will be able to preserve its assets at the level of the beginning of the year, although the Fund's budget was prepared with a deficit," Movsumov said. According to the consolidated audit report approved by the auditing company Ernst & Young, SOFAR assets in 2012 increased by 14.3 per cent and totalled 26,890,136,000 manats.

Cost-effective corridor

Either way, as we said, another fluctuation in oil prices triggered a new wave of discussions on the future of the world economy in the event of a sharp fall. BP's authoritative study "Energy Outlook 2030" notes that over the past decade, the price of fossil fuels has risen to record levels in real terms. Average annual real oil prices in five years (2007-11) increased by 220 per cent compared to the annual average prices for 1997-2001, while similar increases in coal prices reached 141 per cent and gas - 95 per cent. These long-term price changes will inevitably lead to shifts in supply and demand. At the same time, according to leading BP economist Leo Freinkman who presented the forecast in Baku, the next 20 years will see a 36-per-cent increase in demand for energy carriers and energy as a whole due to increased consumption in the electricity sector.

Also, according to Freinkman, in the next 20 years, oil and gas is expected to be produced mainly from the development of "shale" deposits. It is the "shale revolution" in the US that forced BP experts to review last year's oil forecasts for 2030. "Thus, as a result of the growth in shale gas production in North America, the price of oil and gas in 2030 will be lower than we expected a year ago," the expert said.

With the development of this trend, countries that produce conventional oil and gas and especially OPEC countries will have to lower production volumes in order to maintain the balance on the market. Thus, according to forecasts, the volume of crude oil production by OPEC countries will not return to the expected 2013 level of 30 million barrels a day by 2020, as global growth will be dominated by supplies from non-OPEC countries. However, in 2020-2030, supplies are likely to increase by 5.1 million barrels a day, as the growth in production in non-OPEC countries will slow down.

It is expected that oil will be the slowest growing fuel in the next 20 years and the peg of the price of other fuels to oil will be lower and lower. However, to maintain oil production in the world at a cost effective price level, the price of "black gold" should not fall below $ 60. "The corridor of $ 60-120 is more acceptable for the efficiency of the oil business," Freinkman said.

In other words, deviations from this corridor, at least in the next 20 years, are unlikely. However, for today's Azerbaijan this bottom level is undesirable, of course: in spite of the relatively stable level of projected oil production in Azerbaijan for this period, volatile oil prices could theoretically have an impact on the overall level of economic development. But this will happen if we proceed from today's reality. That is why the government regards the maximum development of the non-oil sector as the number one task in the short-term in shaping the country's macroeconomic performance.