Regulating prices for natural-gas motor fuel makes no sense

28 january 2016 | Gazomotory.ru

“It is fairly difficult to track the negative impact of the crisis on the domestic natural-gas motor fuel industry because it is just emerging. The main risk is that development might slow and the targets set earlier might not be achieved,” Alexander Amiragyan, an Analytical Center expert, said in an interview for Gazomotory.ru

Alexander Amiragyan
Alexander Amiragyan
Department for Fuel and Energy Sector

Mr. Amiragyan, the current economic situation creates new risks and offers new opportunities to the country’s economy. Do you think natural-gas motor fuel companies are now facing new opportunities and new risks?

 I would talk about risks in the first place. The overall deterioration of the economic situation is forcing most companies to cut back investments. This trend may affect NGMF companies as well. In 2015, the bulk of investments in fuel gas filling stations came from Gazprom and Rosneft, but they were already falling behind their original construction targets.

The negative impact of the crisis on the sector is bound to manifest in higher prices for imported products as a result of the continued devaluation of the ruble. And it is important because a fairly large proportion of gas equipment installed in cars and equipment used in automobile CNG filling stations comes from abroad.

 And as for opportunities, these mostly have to do with all kinds of state support that are now being made available. First and foremost, the state is allocating annual subsidies to regional governments to buy gas vehicles.

And what can you say about the rising prices of traditional fuels? Are the rising prices for gasoline and diesel fuel coupled with plummeting real household income not going to drive up demand for cheaper gas?

Naturally the big price differential between petroleum products and natural gas is an important factor prompting people to switch to fuel gas. However, the current growth in this price differential is no guarantee of development in the NGMF market.  What we see around the world is that the highest NGMF consumption was achieved in countries that meet a whole range of conditions.

Gasoline and diesel fuel prices increase by an average of 5-10% a year; in other words, they are just keeping up with inflation and they are not going to grow any faster in the future. So the price difference is not going to be a deciding factor in the development of the NGMF market.

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