Reduction of Gas Prices in Armenia will Affect the Pricing of Goods

• 06.09.2016, 12:50
• Lilia Amirkhanyan
•  "Insight" Analytical Center ,  Armenia

At the end of the last month, the Commission on regulation of public services finally approved the decision on reduction of tariffs for gas. From the first of July one cubic meter of gas for Armenian consumers will cost 9.3 AMD (that is cheaper than it used to be). The discussions following the reduction of tariffs, strangely enough, refer not only to the fact that we pay less now for gas, but also to the fact that the price fell less than we expected. In reality the question is  in the expectations of the society - they were waiting for a great decrease in the price of gas.

However, the reduction of tariffs for gas is fixed, and this fact in any way affects the country's economy. If you start with the expected impact of this fact on the decline in prices of different goods in general, it is necessary to divide the production with more and less gas consumption. Naturally, the decline in the prices of goods produced by the first group will be noticeable. For goods produced by the second group, the reduction of tariffs for gas will have little effect. Regarding the goods consumed in our country, given the fact that most of them are imported, it should be noted that the Armenian economy has limited ability to take advantage of lower tariffs for gas.

The exported goods are another thing, which, by reducing their cost, can gain a competitive advantage. However, it should be noted that here we face with the need to divide the production with more and less gas consumption.

If we try to consider the impact of tariff relief on the population, they are more likely to be visible in the periods when the gas consumption will increase.

Summing up, let's refer to two main approaches: the real impact of the decrease in gas prices should be expected in a few months. And before that, in the near future, the results of reduction in gas tariffs will have only a background importance: psychological aspect of pricing implies higher sensitivity, even given the rumors of any changes. And when rumors are confirmed by the fact, the expectations of lower costs in the future will encourage local producers to let the price reduction in order to gain competitive advantage.