The cure for greed. Gasoline prices will freeze until spring

© RIA Novosti / Alexander Galleryparty in photosangelina Board with the prices for diesel fuel and gasoline at one of the gas stations in Saint-Petersburg. 31 October 2018The cure for greed. Gasoline prices will freeze until spring© RIA Novosti / Alexander Galleryparty the image Bank

Today the largest Russian oil companies sign with the government an agreement under which gasoline prices decline to the June level and not rising at least until early next year, and then the rising cost of fuel will be limited to inflation. Why the oilers had to make concessions and what will happen to prices in the spring and in the material RIA Novosti.

Without compromise

On the agreements reached late in the evening of October 31 at a meeting with Deputy Prime Minister Dmitry Kozak, Rosneft, LUKOIL, «Surgutneftegaz», «Gazprom», «Gazprom Neft», «Tatneft», «RussNeft», NOCS, Irkutsk oil company group of companies «New thread» beginning on November 1 supply fuel at June prices and volumes of three percent more than in 2017.

The oil was given the right to increase the price of gasoline from January 1 until the end of March, but only within the official inflation rate. In the spring of the agreement can be renewed.

Businessmen and officials are actively discussing the price of gasoline for the second week. In mid-October, stock prices once again increased, and oil companies are talking about the impossibility to fulfill its June commitment to freeze prices. In practice the June agreement is no longer valid in some regions of the fuel since June has risen by ten percent and more.

The fact that the growth of prices for gasoline and diesel admitted on 29 October, Prime Minister Dmitry Medvedev. The Prime Minister instructed officials to negotiate with oil companies on stabilization of the situation on the market, threatening the protecting duty on export of petroleum products.

It seems that the oil companies did not take this threat seriously. In the beginning of this week, they were asked to increase the cost of gasoline at retail for five cents per liter, citing rising wholesale prices and the planned increase of fuel excise duties in half with the new year.

As earlier, the government usually tried to reach a compromise with the oil companies, seemed very real scenario that officials agree to raise prices. If not for five rubles, then at least two or three.

However, the government showed unprecedented rigidity, promising not only to introduce export duties on 1 November, but to establish a license for the export of oil and oil products, which will be issued only to companies supplying the bulk of production on the domestic market.

Maneuvered, Yes not vymenivali

The reluctance of officials to meet the industry lobbyists connected primarily with the fact that such a step would completely discredit the idea of a tax maneuver, which is long and hard promoted by the Ministry of Finance. The essence of the maneuver — the abolition of export duties on oil and oil products, which have long been sought by Russia of the international organization.

Experts and officials it was clear that the abolition of fees would lead to higher prices in Russia, since the fuel in large volumes will be exported abroad. And so it was.

However, the Agency Siluanov invented a compensatory mechanism for the refinery, which supplies gasoline to the domestic market, the so — called return excise tax on oil. That is, the oil companies promised to return part of paid fuel excise.

However, the oil companies are not inspired by this perspective: it is not very clear how the idea of the return of the excise tax is implemented in practice. Moreover, the «negative excise» should make only 1 Jan. In General, while the fuel suppliers want to make money the old fashioned way — raising prices.

Shattered market

Another reason of stiffness of officials — the position of «Rosneft». The company responsible for the price increase put on independent gas stations and traders.

«Today we are witnessing a provocative campaign initiated by a number of independent filling stations, which is aimed at the aggravation of the socio-economic situation in the regions with the aim of obtaining additional benefits and extraction of extra income for their owners, often living in Russia», — reads the statement of the company published on Wednesday.

Rosneft believes that independent gas stations «is not burdened with the task of maintaining production and processing, as well as the costs associated with the fiscal regulation». In addition, they «take no responsibility for the sustainable provision of oil consumers in the regions and in a number of subjects of the Russian Federation actually monopolizing market, forming a chain of fictitious intermediary companies and turning them into profit centers».

«Independent gas stations used to carry out its activities «in the gray zone,» without a tax accounting in the absence of control over the quality and sources of sold oil products,» — emphasizes the largest Russian oil company.

Apparently, the government shares this position. Deputy Prime Minister Dmitry Kozak on the results of yesterday’s meeting directly accused the independent gas stations in the sway of the market.

«The situation was somewhat artificially shattered, — said Kozak. — It is clear that money does not happen much, every segment and market participant fights for their income, and the independent retail segment, which occupies 53% of the retail market of oil products in favour of lower wholesale prices can be even not always justified».

The Executive power is no longer going to listen to the complaints of independent sellers of fuel for permanent losses and are willing to work hard.

«The fact that someone does not receive income in connection with the supply of the domestic market, are not accepted by either citizens or other economic entities, cannot be accepted and the political leadership of our country,» said Dmitry Kozak, noting that the government is ready at any time to return to the question of the introduction of export duties on oil and oil products.

What’s next

Until the end of the year the price of Russian gas stations at least will not grow. But reduced hard to believe, because so far such precedents in the Russian fuel market was not. With the new year we should expect a small price increase, «in accordance with the rate of inflation».

However, price increases may not be as winter fuel demand traditionally falls. The conflict of oil workers with the government is likely to develop in the spring, when rises the demand for gasoline and diesel.

The willingness of officials to make concessions largely depends on world oil prices. If, in accordance with the forecasts of some experts, the price will soar to $ 100 per barrel because of the us sanctions against Iran, the government will be difficult to restrain the appetites of oil industry workers wishing to earn more on the export of «black gold».

However, some analysts believe that oil prices will fall to $ 50. Then the attractiveness of exports will decline, and prices in the domestic market stabiliziruemost.