BAKU, Azerbaijan, April 16. The rising
geopolitical tensions in the Middle East have recently become one
of the main topics of discussion in the global energy market. In
particular, the escalation of the U.S.-Iran conflict and the risks
arising around the Strait of Hormuz have led to serious price
increases in the oil market. As a result of this process, Brent oil
has exceeded $100 at times, and even the possibility of an increase
to the range of $150-200 is being discussed in analytical
scenarios.
As a result, Azeri Light oil, the main export product for
Azerbaijan, also grew in price. Currently, the price of Azerbaijani
oil has exceeded $118. In the 2026 state budget of Azerbaijan, the
average price of a barrel of oil is taken at the level of $65.
Thus, a difference is formed between market prices and the base
price envisaged in the budget, but precisely at this point, the
main issue arises: this difference doesn’t affect the budget to the
same extent.
Economists on the issue believe that there is no direct
and immediate connection between short-term price jumps and real
state budget revenues because budget revenues are formed not only
from the selling price of oil, but also from production volumes,
existing contract terms, operating costs, and tax mechanisms.
That’s why, even if the price grows, this increase isn’t reflected
in the fiscal system in the same proportion.
The views of economist Eldeniz Amirov also confirm this
approach. He noted that in the long term, this effect of oil price
increases is weakened by inflation and increased costs. That is,
the price increase, which seems large at first glance, is actually
balanced by various factors within the economic system.
“Oil price increases create different economic effects in the
short and long term. In the long term, they accelerate inflation in
import-dependent economies, which negatively affects the purchasing
power of the population,” he said.
Amirov emphasized that price increases also affect the inflation
process. According to him, this impact is not limited to
Azerbaijan.
“Every 10% growth in oil prices in the world has a negative
impact of 0.5 percentage points on inflation indicators,” he
explained.
Short-term growth, long-term uncertain
impact
This approach is also reflected in specific figures. According
to preliminary estimates, oil revenues increased by about 20% in
the first quarter of 2026, which means an additional 360 million
manat ($211.7 million) in total. However, against the background of
a sharper hike in prices, this indicator shows that the fiscal
impact remains limited.
On the other hand, Azerbaijan’s fiscal policy is also built
taking into account such volatility. The base price taken into
account in the budget reflects a cautious approach, and long-term
planning is not carried out for short-term price increases.
Consequently, a significant part of the additional revenues is
not directly directed to the budget. These funds are mainly
accumulated in the Oil Fund and stored as reserves. Thus, the
impact of price increases on the budget is further limited.
Economist Ilham Shaban also emphasized that although budget
revenues increase against the backdrop of price increases, this
increase is not in the same proportion as prices because the
decline in production, company costs, and other factors determines
the final result.
According to him, the main beneficiaries are transport and
logistics companies, as well as insurance and credit
institutions.
International assessments also show a similar picture: although
the increase in energy prices creates a short-term opportunity for
exporting countries, this process is accompanied by high volatility
and inflation risks.
Consequently, although the current price increase creates
certain additional opportunities, sustainability remains the main
condition for its transformation into a long-term fiscal
effect.
Thus, it’s considered a more realistic approach to assess the
current situation as a limited and temporary effect rather than a
large-scale income increase.
Domestic stability against the backdrop of global price
increases
Rising oil prices in global markets usually also affect domestic
fuel prices. In many countries, this increase is felt directly and
has a wide-ranging impact, starting from production costs and
ending with general inflation.
However, a different model is applied in Azerbaijan. The state
keeps the prices of basic energy products stable through regulatory
mechanisms.
This approach, on the one hand, protects social welfare, and on
the other hand, limits the impact of global price increases on the
domestic economy.
The same principle is observed in the gas market. Even if global
prices increase, maintaining domestic tariffs stable prevents a
sharp increase in energy costs.
Thus, Azerbaijan’s approach is more focused on maintaining
stability in volatile energy markets than on maximizing short-term
profits. In this context, the main priority is to manage risks,
maintain budget sustainability, and avoid disruption of social
balance.
Maintaining stable fuel and gas prices in the domestic market is
also a practical tool of this strategy. This mechanism, on the one
hand, prevents a sharp increase in population spending, and on the
other hand, limits additional pressures in the business environment
and keeps overall inflation risks under control.
