However, it is impossible for the rise in exchange prices not to eventually affect fuel costs at retail outlets. Gas stations acquire fuel through exchanges or oil depots. Major chains, belonging to large oil companies, may procure directly from refineries. Yet even they do not always follow this practice. Since the beginning of the year, retail prices have risen only by 2.4% for gasoline and 1.6% for DF, which is below the country's average inflation rate of 2.59%. Notably, the price increase for gasoline has accelerated significantly since the beginning of March.
Meanwhile, against the backdrop of the Middle Eastern crisis, there are reports of sharp fuel price increases abroad. A notable example is the U.S., where prices have surged by 35%. Moreover, retail prices have risen more than wholesale prices.
Fuel prices have also increased in European countries and China, which is not surprising, as both are oil importers, and the current crude oil quotes refuse to drop below $95 per barrel. What is concerning is that the bulk prices in Europe have increased by an average of 9-10%, while in China, they have rose by 11-12%, both of which are lower than in Russia. This indicates that they import oil—indeed, China sources oil from Russia—but fuel prices have risen more sharply in Russia.
As noted by Yuri Stankevich, Deputy Chair of the State Duma Committee on Energy, in a conversation with "RG", the rise in exchange prices for fuel in Russia since the beginning of the conflict in the Persian Gulf is primarily linked to export alternatives (essentially the price of our fuel for overseas shipments). This effect is compounded by seasonal demand increases and supply constraints (refinery repairs, logistics).
He indicated that in the EU, a high tax component in fuel prices smooths out fluctuations in raw material costs, while in China, prices are largely regulated by the state. In Russia, the market is more sensitive to export conditions, and the damping mechanism (subsidies from the budget to oil companies for domestic market supplies priced below export levels) currently does not fully compensate for the rise in external prices.
The Middle Eastern crisis indirectly influences us through global oil and petroleum product quotes. While there are no physical risks for domestic supply, a premium for geopolitical risks is built into the price, Stankevich clarifies.
The rise in exchange quotes for gasoline and diesel fuel has yet to translate into noticeable cost increases at gas stations.However, it remains somewhat unclear why our wholesale prices are rising more sharply. The tax components in our fuel are no less than in some EU countries, and government control over the fuel market matches that in China, even though there prices are set by the government.
According to Sergey Tereshkin, CEO of Open Oil Market, it would be a mistake to link the rise in exchange prices with the consequences of the Middle Eastern conflict. Rather, it reflects the oil companies' desire to recover their losses from recent months. In January, the disbursement under the damping mechanism totaled only 16.9 billion rubles, which is 90% less than the previous year; and in February, oil companies even had to make an additional payment of 18.8 billion rubles to the budget. The lower the subsidies, the lower the refining margins, and the stronger the incentive for oil producers to increase profitability through higher prices.
However, in March, the damping payments will increase, and April’s allocations (based on March results) are expected to reach maximum levels for 2024, exceeding 130 billion rubles. Oil companies are unlikely to overlook this factor.
Sergey Frolov, Managing Partner at NEFT Research, believes that under current conditions, the rise in exchange prices was inevitable. The market effectively suffered a double blow—an increase in mineral extraction tax (MET) due to rising global oil prices and rising export alternatives for fuel producers. The only mechanism to restrain quotes has been the damping mechanism. However, this temporary measure designed to curb price rises following tax maneuvering (the elimination of export duties and increases in oil extraction taxes, set to be completed in 2024) has been made permanent. It was developed under specific macroeconomic parameters and works correctly only within a narrow range of external and internal conditions. This is why it requires constant adjustments (sometimes multiple times a year). The expert believes that the only long-term solution to this issue is a return to the export duty system while simultaneously changing the MET calculation formula. Yet, he suggests that the current mechanism may simply be augmented by an export duty.
Nevertheless, no sharp increases in prices at gas stations are anticipated by experts. If oil prices continue to rise, then exchange prices may increase further, according to Stankevich. However, retail prices at gas stations typically respond more slowly and in a more tempered format, suggesting that any increase will likely correlate with inflation trends.
The Middle Eastern crisis places indirect pressure on the Russian fuel market through global oil quotes.Dmitry Gusev, Deputy Chair of the Board of the "Reliable Partner" Association and a member of the expert council of the "Gas Stations of Russia" competition, is convinced that as long as we produce our own gasoline and diesel, they will be sold at prices determined by the Ministry of Energy and the Federal Anti-Monopoly Service. However, a problem looms: a shortage of refining capacity is already being felt (albeit only in prospect), and there are no incentives to increase these capacities. Once Russia is forced to import gasoline, prices will skyrocket to world levels.
Tereshkin notes that the logic for exchange prices of gasoline and diesel is essentially the same: prices rise when fuel producers need to offset financial losses. This principle is currently at play, which is why prices are increasing in March. However, it’s worth noting that diesel fuel is produced in twice the quantity than internal market demand requires, whereas gasoline production is only 10-15% ahead of demand. Given this discrepancy, the rise in exchange prices will reflect on retail gasoline and DF costs.
In the Moscow region, fuel prices at gas stations have increased by almost 20 kopecks this week. Moreover, motorists have noted price hikes at nearly all gas station owners. Experts associate this price rise with the instability in the global oil market stemming from the situation surrounding Iran.
According to the Moscow Fuel Association, as of March 23, the price of AI-92 gasoline rose by 21 kopecks over the week, reaching 63.58 rubles per liter. AI-95 gasoline also saw a similar increase, with its price now at 70.09 rubles per liter. The highest prices for AI-92 were found at "Gazpromneft-Center" stations, where it costs 64.57 rubles per liter, while at "Lukoil-CNP," the price is 64.37 rubles. Here too, the highest prices for AI-95 have been recorded at 71.70 rubles per liter, while "Teboil" charges 71.11 rubles per liter. Diesel fuel has risen on average by 15 kopecks and now stands at 76.98 rubles per liter, with "Trans-Gas Stations" selling it at the highest price of 79.59 rubles per liter.
This price growth has been noted for several consecutive weeks, with weekly increases averaging 20-40 kopecks per liter. Price hikes have been recorded at all major oil company gas stations in the capital region.
Automotive expert Igor Morzharettos noted to "RG" that the rise in prices comes as no surprise: "Fluctuations in oil market prices are directly connected to the military operations by the U.S. and Israel in Iran. These significantly impact both wholesale and retail markets. However, in Moscow, these fluctuations are minimal. The government tightly controls the market, so sharp price jumps are not expected. Meanwhile, inflation is still a factor, which is anticipated to be within 5-6 percent this year. Thus, by the end of the year, AI-95 could rise to 72-73 rubles."
Additionally, spring price rises for fuel are quite logical, being a result of increasing demand. The economy in the Moscow region is gaining momentum, particularly with agricultural activities ramping up, construction projects waking up, and city dwellers taking their cars out more frequently during pleasant weather, often heading to dachas, for instance.
Source: RG.RU
