The Ministry of Mining and Heavy Industry, Mongol Bank and Mineral Resources and Petroleum Authority (MRPAM) held a joint meeting with petrol importers on Tuesday morning in connection to the recent increase in fuel prices.
In July alone, local petrol distributors raised their prices by 600 MNT per liter, causing financial strains on locals amid the pandemic.
At the beginning of the meeting, Minister of Mining and Heavy Industry G.Yondon stated, “In Mongolia, the price of AI-92 fuel was 1,735 MNT per liter in January 2020. It sank to its lowest at 1,350 MNT per liter in April. We managed to maintain fuel prices at a constant level for over a year. During this period, world oil prices rose by 3.6 times from 19.9 USD to 74 USD per barrel.
“Over the past year, the government took steps to regulate fuel prices. As a result, fuel importing companies began to incur some losses since January 2021. From January to the end of June, the losses of enterprises amounted to 600 MNT per liter. In general, retail fuel price tends to grow when global market prices rise. To control the price of fuel during the pandemic, we met with petrol importers and reached an agreement to keep the price of AI-92 at 1,450 MNT until vaccination reaches 60 percent of the population or the economy recovers.”
The ministry views that the price control measure was effective as it prevented an even higher price increase, which would have been gradual but frequent.
On July 30, when petrol prices spiked, the national vaccination rate had reached 66.7 percent for the first dose and 60.7 percent for second dose, indicating that petrol companies kept their end of the bargain.
N.Naranbat, director of NIK JSC, which is owned by Mongolia’s leading fuel distributor Petrovis LLC, commented, “We didn’t increase our prices as we agreed to keep prices until the national vaccination rate reaches 60 percent. We didn’t change prices until July even when commodity prices surged. In this sense, it’s an exaggeration to say that fuel prices affect consumer prices. We didn’t fire anybody despite facing losses.”
In addition, Russia has stopped exporting AI-95 and AI-98 petrol, forcing Mongolia to turn to its southern neighbor for fuel supplies. NIK has formed an agreement with a Chinese company to import AI-95, according to N.Naranbat. Regarding the recent inspection by the Authority for Fair Competition and Consumer Protection, he raised doubts about the results, particularly in terms of petrol quality. Nevertheless, NIK is working to adopt European standard (Euro 5) to improve its fuel quality, said N.Naranbat.
As Russia hasn’t banned exports of AI-92, Mongolia will continue to import this type of fuel and maintain adequate reserves, says Minister G.Yondon.
Under a new agreement with the Chinese side, the ministry is importing 1,130 tons of AI-95 petrol from China. The cargo had reached the Erenhot port last Saturday. At present, Mongolia reportedly has enough AI-95 reserves to cover over 40 days of normal consumption.
Petrol importers forecast that fuel prices may increase in coming months. However, MRPAM is adamant on controlling prices.
“Despite the spike in fuel prices on global market, the ministry and MRPAM intend to implement an integrated policy in the future. It is unlikely for fuel prices to increase in the future as extractive countries have increased production to prevent oil price from reaching 100 USD per barrel until the end of the year. By keeping the price of AI-92 at 1,450 MNT until the end of 2020, we saved about 14 billion MNT. Funding was not allocated from the state budget. There was no talk of raising fuel prices either. We will present the direction to ensure the stability of fuel prices at the upcoming Cabinet meeting,” said Ts.Erdenebayar, head of MRPAM.
