However, the increase in exchange prices cannot fail to eventually influence the cost of fuel at gas stations. Fuel is purchased through the exchange or from oil depots. Major networks, which are owned by large oil companies, may directly purchase from refineries (NPPs). Yet even they do not always engage in this practice. Since the beginning of the year, retail prices have only risen by 2.4% for gasoline and 1.6% for DF, which is lower than the average inflation rate in the country, which stands at 2.59%. Notably, since the beginning of March, the rate of increase in gasoline prices has notably accelerated.
Meanwhile, against the backdrop of the crisis in the Middle East, there is a flood of news about sharp fuel price hikes abroad. Primarily, this concerns the United States, where prices have increased by 35%. Moreover, retail prices have risen more than wholesale prices.
Fuel prices have also risen in European countries and China, which is not surprising, as they are oil importers, and current oil quotes are reluctant to drop below $95 per barrel. Another concern is that the increase in wholesale prices in Europe has averaged 9-10%, while in China, it stands at 11-12%, which is lower than in Russia. This means that they are importing oil, and moreover, China is purchasing it from us, while wholesale fuel prices have surged more in Russia.
As noted in an interview with "RG" by Yuri Stankevich, Deputy Chairman of the Energy Committee of the State Duma, the rise in stock prices for fuel in Russia since the start of the conflict in the Persian Gulf is primarily related to export alternatives (the price of our fuel when supplied abroad). This effect is compounded by seasonal demand increases and supply limitations (refinery repairs, logistics).
According to him, in the EU, the high tax component in fuel prices smooths out raw material fluctuations, while in China, prices are largely regulated by the government. In Russia, the market is more sensitive to export conditions, and the damping mechanism (subsidies to oil companies from the budget for supplying fuel to the domestic market at prices lower than export prices) is currently not fully compensating for the rise in external prices.
The crisis in the Middle East indirectly affects us through global oil and petroleum product quotes. There are no physical risks to domestic supplies, but the premium for geopolitical risks is factored into the price, Stankevich clarifies.
The rise in stock quotes for gasoline and diesel fuel has yet to significantly reflect on their cost at gas stations.It remains somewhat unclear why wholesale prices are rising more sharply here. The tax component in fuel for us is no less than in some EU countries, and government control over the fuel market is at least as stringent as in China, although prices there are indeed set by the government.
According to Sergey Tereshkin, CEO of Open Oil Market, it would be erroneous to link the rise in stock prices to the consequences of the Middle Eastern conflict. Rather, it is influenced by oil producers' desire to compensate for losses in recent months. In January, payments on damping amounted to only 16.9 billion rubles, a decrease of 90% compared to the previous year; in February, oil companies even had to pay an additional 18.8 billion rubles to the budget. The lower the subsidies, the less profitability there is in oil refining, and the greater the incentives for oil producers to increase profitability through price hikes.
However, in March, subsidies are expected to rise, and payments for April (based on March results) are likely to be at the maximum level for 2024, exceeding 130 billion rubles. It is hard to believe that oil companies do not take this factor into account.
Managing Partner at NEFT Research, Sergey Frolov, believes that under current conditions, the increase in prices on the exchange was unavoidable. The market essentially received a double blow – an increase in mineral extraction tax (MET) due to rising global oil prices and increasing export alternatives for fuel producers. The only mechanism that suppresses quotes is the damping system. But this temporary mechanism, intended to curb price increases following tax maneuvering (cancellation of export duties and an increase in production taxes, which is expected to conclude in 2024), has been made permanent. It was designed under specific macro parameters and functions correctly only within a narrow range of external and internal conditions. This is why it has to be changed constantly (sometimes multiple times a year). The expert believes that the only long-term solution to this problem is a return to the system with export duties, accompanied by a modification of the MET calculation formula. However, it is more likely that an export duty will be attached to the existing mechanism, he suggests.
Nevertheless, no experts expect a sharp rise in prices at gas stations. If oil prices continue to soar, exchange prices may rise further, Stankevich asserts. However, retail prices at gas stations typically react more slowly and in a more muted manner – the increase is likely to correlate with inflation dynamics.
The crisis in the Middle East indirectly affects the Russian fuel market through global oil quotes.Dmitry Gusev, Deputy Chairman of the Supervisory Board of the "Reliable Partner" association and a member of the expert council of the "Gas Stations of Russia" competition, is confident that as long as we produce our own gasoline and DF, they will be sold at prices dictated by the Ministry of Energy and the Federal Antimonopoly Service (FAS). However, there is a problem: a shortage of refining capacity is already being felt (albeit only in the future), and there are no incentives for increasing it. Once Russia is forced to import gasoline, prices will soar to global levels.
Tereshkin observes that the same logic generally characterizes stock prices for gasoline and diesel: prices tend to rise when fuel producers need to offset financial losses. This principle is currently at play, resulting in price increases in March. However, it is worth noting that DF production in our country is twice the internal market demand, while gasoline production only slightly exceeds demand by 10-15%. Given this disparity, the rise in stock prices will reflect on retail prices for gasoline and DF.
This week, fuel prices at gas stations in the Moscow region rose retail by almost 20 kopecks. Moreover, motorists noticed price hikes at almost all gas station owners. Experts attribute this process of rising prices to instability in the global oil market due to the situation surrounding Iran.
According to the Moscow Fuel Association's data as of March 23, the price of AI-92 gasoline rose by 21 kopecks over the week, reaching 63.58 rubles. The same increase was seen for AI-95 gasoline, which now costs 70.09 rubles per liter. The highest prices for AI-92 were found at "Gazpromneft-Center" stations, where one has to pay 64.57 rubles per liter, while the "Lukoil-CNP" station charges 64.37 rubles. The highest price for AI-95 is at the "Teboyl" station, where one liter costs 71.70 rubles, followed closely by 71.11 rubles at the same station. Diesel fuel has increased in price by an average of 15 kopecks and now costs 76.98 rubles per liter. The most expensive diesel is sold by "Trans-AZS" at 79.59 rubles per liter.
Price increases have been noted for several weeks in a row. The weekly increase in price is about 20-40 kopecks per liter. This price rise has been recorded at all the major oil companies' stations in the capital region.
Igor Morzharetto, an automotive expert, told "RG" that the rise in prices should not come as a surprise: "Price fluctuations in the oil market are directly linked to the military operation of the U.S. and Israel in Iran. They significantly affect both the wholesale and retail markets. However, in Moscow, these fluctuations are minor. The government strictly controls the market, so sharp price jumps are not expected. Meanwhile, inflation is still a factor. This year, it is anticipated to be within the range of 5-6 percent. By the end of the year, AI-95 could cost around 72-73 rubles."
Furthermore, springtime price increases for fuel are quite normal – they result from rising demand. The economy in the Moscow region is becoming more active, particularly with increased agricultural work, construction projects gaining momentum, and city dwellers frequently using their cars in good weather for trips to their summer cottages.
Source: RG.RU
