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The government has restricted the export of gasoline: will this stop the price increase

Kondratiev Sergey V. Principal Director on Economic Studies, Head of the Economic Department

The Tinkoff-Journal internet portal published a column by Sergey Kondratiev, Principal Director on Economic Studies at the Institute for Energy and Finance on gasoline prices on the domestic market.

Why are gasoline prices rising

There are several reasons for the increase in gasoline prices. Probably, individually they would not have led to such a result, but all together they formed a problem. That's what pushes prices up.

Rising prices for gasoline and diesel fuel on world markets. Crack spreads, that is, the difference between the cost of gasoline and oil, have grown strongly in Asian markets. If at the beginning of summer the crack spread for diesel fuel and oil was about $ 140-150, then by the end of summer it reached $ 300. This has seriously increased the attractiveness of gasoline and diesel exports for Russian oil companies.

Adaptation to sanctions. Since February 5, 2023, there has been an embargo on the supply of Russian petroleum products to the European Union. By the summer, logistics flows, which were hampered in the first months after the introduction of European sanctions, managed to be rebuilt. Russian oil products have entered the markets of North and West Africa, the Middle East, and Latin America. Brazil has become the second largest buyer of Russian diesel after Turkey. External demand is high, there are opportunities for export.

The weakening of the ruble. This has led to the fact that it is more profitable to export, and this is pulling up prices in the domestic market.

Repairs at the refinery. Refineries are repaired every year, and mostly in the summer. This may look illogical, because in summer, as a rule, the peak of demand is due to vacations and agricultural work. But in summer it is easier to repair.

The growth of demand for domestic tourism. Since the 2010s, Russians have been traveling more around the country by private vehicles, and in the last two or three years this trend has intensified, including because flights around the country and abroad are too expensive now. This also leads to a high demand for gasoline.

Reduction of the damper payments. In 2019, a damper was introduced in Russia for gasoline prices — a special stabilizer that does not allow gasoline prices to fluctuate too much.

Shadow export. Shadow exports are arranged as follows: the refinery actually ships petroleum products to the domestic market, and then traders redirect supplies for export. This is usually unprofitable, because a trader cannot legally receive a refund for excise duty and VAT, which are paid for deliveries to the domestic market. But now the price in foreign markets is so high, which makes such supplies profitable.

The workload of Russian Railways. Due to the redirection of transport flows within the country and for export, the railway has been overloaded in the last year and a half. In some cases, the delivery of fuel shipments, which previously took 5-7 days, may take 10 days or two weeks. In some cases, traders say they have been waiting for their batch for more than a month. This creates problems at the regional level and at the gas stations themselves — there is a shortage.

When will prices stop rising

Now the market is facing two serious challenges: a local shortage, that is, the disappearance of fuel at individual gas stations in some regions, and a continuing rise in prices.

I think that in October — November, the severity of the problem of physical fuel shortage will decline due to the seasonal reduction in consumption and the measures taken by the government to limit the export of petroleum products.

The situation with prices are getting more complicated. Stock prices are now declining due to reports of export restrictions, but the problem with the price difference in the external and domestic markets has not disappeared. This means that in the future, with the lifting of restrictions, prices may return to growth and the government will have to discuss mechanisms for equalizing price conditions, that is, in fact, to return to the choice between a damper, an export duty and a "third way".

Kondratiev Sergey V. Principal Director on Economic Studies, Head of the Economic Department
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