By Vestnik Kavkaza
In September, gasoline prices grew by 3.3% in Russia in comparison to August. The price increase affected customers in 77 regions of the Russian Federation. Oil prices produced in September grew by 6.1% (by 16.8% since the beginning of the year).
The situation on the fuel market is commented on by Yevgeni Arkusha, president of the Russian Fuel Union, and Anatoly Golomolzin, deputy head of the Federal Antimonopoly Service of Russia.
“If we look at average figures for the whole year, we will see that indeed there was an increase in wholesale and retail prices,” Arkusha says. “But this growth is quite objective. It is associated with two main points: inflationary issues and increasing excise taxes, which have been planned for a few years and are scheduled for a few more years to come. If you look at the average figures for the 10 months of the year and compare them with the average figures of last year, we will see that wholesale prices rose in comparison, I emphasize once again, with average figures of last year by only 2%, and retail prices have grown by about 6 - 7%. These figures entirely fit those inflationary pressures that we have seen in the country.”
July and August were marked by a fairly sharp increase in wholesale prices by about 20-30 %, “but we must not forget that during the first half of the year, wholesale prices significantly decreased due to certain factors - large stocks and the presence of Belarusian gasoline in our market. Therefore, in principle, this price increase was expected. The only thing that was not very nice is the fact that this increase was simultaneous, within two months, and caused tension in the industry,” Arkusha states.
At present, he said, “wholesale prices have stabilized, and we are seeing a more bearish trend. In addition, retail prices today are on the verge of profitability: today, if we look at Moscow's prices, both wholesale and retail ones, we will see that the marginal rate of return is 10-11 %. In principle, it is even lower than that required for normal operation. Therefore, in the near future we expect wholesale prices to reduce, and possibly by the end of the year, maybe, we’ll even see a decline in retail prices.”
As for predictions for the next year, Arkusha says that prices will rise: “We have at present no objective economic factors that can lead to lower prices. The annual increase of excise duties, inflation plus something that the Ministry of Finance calls a "tax maneuver" - it can be evaluated in different ways, but if you look globally, we’ll see that the Ministry of Finance plans as a result of this manoeuvre to get into the budget an additional 175 billion rubles. Naturally, this money must eventually be taken from consumers… There will be 8%, which we will see in the next year as rising prices. These are the approximate numbers, but they are derived from the objective indicators that we currently have. In principle, I repeat, in reality prices, unfortunately, will continue to grow. The task of both state regulator and market participants is to make sure that this growth will be fairly smooth and does not cause either excessive demand as a positive feedback or any nervous attitude among the consumers.”
“If you look at the data of Rosstat, they change in the retail market with the rate close to the rate of inflation,” Anatoly Golomolzin, deputy head of the Federal Antimonopoly Service of Russia, says. “What affects the price? The situation in the domestic market is the extent to which supply and demand are balanced. We have signed a quadripartite agreement with oil companies to ensure that any concerns and risks associated with it can be eliminated. Now the oil companies have signed agreements with us, 18 of the largest companies in the country. Using constant monitoring, we monitor the compliance for our rules of adequate supplies of fuel in the domestic market, according to the processes of modernization.”
The FAS is concerned with issues related to the fact that the fuel produced in the country was offered in sufficient quantities to the domestic market. “In summer significant amounts were sent for export. During the summer months, the scope of supply for the domestic market somewhat lagged behind similar numbers of last year. Now the situation has stabilized. There are sufficient reserves of fuel – gasoline, the necessary fuel reserves of diesel fuel, including winter fuel. Exchange trading has substantially alleviated the situation in the market, including due to the fact that we are increasingly getting close to the modes of uniformity and regularity of trading,” Golomolzin states.
He also said, the FAS “sent certain requirements of regularity and uniformity to several companies. Accordingly, the companies performed in full all the requirements that have been established in this notice, and the fuel is sold in the mode of regularity and uniformity… This year and last year a sufficient volume of transactions was recorded on the stock exchanges that allow us to have adequate indicators of domestic market prices. Plus we also track prices of comparable foreign markets in order to find in this triangle of indices of the exchange, OTC and netback an optimal market price. We are also monitoring the situation with the reserves, and our territorial management and monitoring are carried out on stocks in regional markets. Our colleagues in the Ministry of Energy conduct an appropriate analysis of the system for both petroleum products supply and refineries. Plus we are now discussing issues related to the improvement of fuel reserves. It is important to have clear indicators of reserves and the possibility of using the reserves in case there is an unpredictable situation. Also, we are now discussing these issues through appropriate changes in the law, together with our colleagues. In general, the situation is being controlled.”
There are several factors that determine the overall nature of the turnover of oil products in the domestic market which the competition authorities cannot influence. “In particular, the tax issues in the last few years have been the main driver of rising prices in the domestic market," he added.
