Regulation does not cancel free prices on the exchange

2 november 2018 | Rossiyskaya Gazeta

The government and oil companies have found a way to prevent fuel prices from rising until the end of this year, writes the Rossiyskaya Gazeta. Starting November 1 the Russian fuel market is to be managed in manual mode on a temporary basis. This means new obligations for producers and the freezing of prices at the filling stations for the consumers through the end of the year.

Alexander Kurdin
Alexander Kurdin
Department for Fuel and Energy Sector

"There was some regulation in this market before, back when companies kept retail prices from growing, Alexander Kurdin, Head of Research at the Department for the Fuel and Energy Sector of the Analytical Center, points out. "Now the list of regulated transactions has been expanded but it does not cancel free prices on the exchange and in a number of other whole sale deals not directly related to the retail sales of fuel."

The amendments to the tax laws, which are to be adopted in the coming months, will help to partially solve the current situation, the expert added. They relate to adjusting the conditions for completing the tax manoeuvre in the industry using excise deductions. "But a lot will depend on external factors: when the dollar price of oil is high while the ruble remains relatively cheap as right now, pressure on the prices of raw materials is inevitable," Mr Kurdin explained.

Oil refineries will now bear part of the burden as fuel is effectively being redistributed to consumers and this burden is going to vary depending on the characteristics of each refinery (whether or not it is part of a vertically integrated company and what fuels it makes and sells in what proportions). "It's difficult at the moment to make any quantitative estimates," the expert believes.

Source: Rossiyskaya Gazeta