HomeMediaLatest NewsMinistry of Finance wants to change the mechanism of oil taxation

Ministry of Finance wants to change the mechanism of oil taxation

26 June 2023

Belogoryev Alexey M. Research and Development Director, Director of the Center for Energy strategic analysis and forecasting

Alexey Belogoryev, Research and Development Director of the Institute for Energy and Finance commented to Business FM on the possible development of pricing in the oil market.

The agency is studying two options: switching to linking oil to the Dubai quote and reducing the maximum discount for Brent oil. This was reported to the Vedomosti newspaper by Deputy Finance Minister Alexei Sazanov.

“Most likely, the Ministry of Finance will choose the middle option, mixed. It is not opposed to being linked to Dubai, which makes little difference in terms of taxation. Dubai is slightly cheaper than Brent, the difference is now quite small - within a dollar, but retrospectively, prices diverged, in 2022 the average yearly difference was about five dollars. It is more important for the Ministry of Finance to reduce the discount, this is important in terms of the total amount of budget revenues. The Ministry of Finance will insist on reducing the discount, at least this reduction from 25% to 20%, and it is no longer so important to which particular benchmark this will be tied. The question is not which grade will be chosen, but how much revenue the Ministry of Finance wants to receive, and how it sees the further development of pricing in the oil market.

Judging by the statements, the general mood has become more positive both in the Ministry of Finance and in the government. Oil companies also see the market more optimistic than they did at the beginning of the year, despite lower prices. It will be an endless debate as long as there are discounts, and they will last as long as there are sanctions. The key question is how to determine and identify the real discount when selling Russian oil.”

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