Oil Price is Just One of Several Factors of Motor Fuel Trade Price Assessment

18 june 2018 | Expert

Why was such pricing formed that it became unprofitable to produce fuel in Russia? Oleg Kolobov, Senior Adviser for the Department of Fuel and Energy Complex of the Analytical Center, answered this question to the Expert magazine.

Oleg Kolobov
Oleg Kolobov
Department for Fuel and Energy Sector

Gas and diesel fuel are export goods, this is why trade prices for them in the internal market are formed on the basis of so called export net back principle or export alternative, Oleg Kolobov said.

This principle supposes equal profitability when performing delivery of corresponding goods to the internal and external markets. The net back principle is a market pricing method for goods which are in demand on the internal and external markets.

Kolobov explained that net back prices for gas and diesel fuel were calculated on the basis of prices formed in the centers of international trade, for example, in Rotterdam, after deduction of export customs duty rate and transportation expenses. The obtained value is increased by the rate of corresponding excise duty and VAT which are not charged during fuel export (for comparison with internal prices for gas and diesel fuel).

According to the expert, oil price is just one of several factors of motor fuel trade price assessment. At the same time, key factors of motor fuel trade price assessment in Russia are customs duty rates for oil and oil products, excise duties and exchange-value of ruble, change of which in aggregate may completely frustrate the effect of growth or decrease of oil price or even have a greater effect.

Source: Expert

Photo: from open sources