Tax maneuver in the oil sector can lead to an increase in domestic prices

27 june 2014 | Rossiyskaya Gazeta

In a few days, the Ministry of Finance and the Ministry of Energy should get to a final agreement on the parameters of the tax maneuver in oil sectorThis maneuver will use the Severance Tax to increase the burden for oil production while reducing the taxes on exports of oil and petroleum products. Accordingly, the supply of petroleum products to the domestic market may become less profitable.

Alexander Kurdin
Alexander Kurdin
Department for Strategic Studies in Energy

“This can lead to an increase in domestic prices, - commented on the current situation the Head of the Department for Strategic Studies in Energy of the Analytical Center Alexander Kurdin, to the “Rossiyskaya Gazeta”. - But they are affected by many other factors, including policy on motor fuel standards, the success in modernization of the refining process, the correlation between taxes for various petroleum products, the state of the pipeline infrastructure, as well as the intensity of competition within the domestic market”.

The expert added that during similar reforms it often turns out that changes occurring on foreign or domestic markets lead to different results than those obtained during simulations.

The article says that in the past, Ministry of Finance has been estimating the limit increase in gasoline prices due to tax maneuver to be between 2 and 2.5 rubles. Mr. Kurdin considers that any additional increase in price will be constrained by the Antimonopoly Service so there won’t be any significant jump.

The expert also added that preconditions for the refinery transition to a fuel that is not less than "Euro-5" are quite high and the modernization of the refining process is conducted by a number of undertakings.