"Russia can be covered by a wave of counterfeit gasoline"

Alexey Gromov, Principal Director on Energy Studies of the Institute for Energy and Finance, commented to Gazeta.ru regarding the risks of increasing the cost of gasoline in Russia by the end of 2021.

Panic mood

Governor of Kamchatka Vladimir Solodov announced the "galloping" rates of gasoline prices in Russia. According to him, a negative trend is developing throughout the country. To remedy the situation, Solodov even applied to the Federal Antimonopoly Service in order to check the largest oil traders.

According to Alexei Gromov, the scenario of a sharp rise in gasoline prices in Russia is now practically impossible due to the structural features of price formation in the domestic market.

“In Russia, taxes and fuel excise taxes make up 70% of the cost of gasoline. Only 7-8% of the price depends directly on the growth of world oil prices. Therefore, I do not see the threat of "galloping" jumps in gasoline prices. However, by the end of December, a relative increase in fuel costs up to 50-51 rubles per liter of major brands is possible,”Gromov said.

The expert added that the statement of the Kamchatka’s governor is justified in terms of the Far East specifics. It still remains a problematic region in Russia, given its geographical distance from the main oil refineries. As a result, logistics costs are directly included in the inflated cost of gasoline for end users. At the same time, it would be wrong to transfer this factor to the rest of the country, Gromov concluded.

“Kamchatka is a region where fuel is delivered from outside. It is important to understand that this may increase transport costs there. However, this problem concerns mainly remote Russian territories, which include the Khabarovsk Territory and Primorye. Within the framework of the entire country, growth in gasoline prices by the end of December should be expected within inflation,” the representative of the Institute for Energy and Finance explained.

According to Gromov, the Russian domestic market is currently in a safer position than the US market. American fuel cost records (in October, domestic gasoline prices in the United States reached a seven-year peak of $ 3.22 per gallon - Gazeta.Ru) are largely due to the tight pegging of external oil prices. In Russia, the cost of gasoline is artificially controlled by the state, which protects domestic prices from sharp surges.

“In Russia, the cost of raw materials is less than 10% of the final price of gasoline on the domestic market. In addition, the authorities have a damper mechanism. In an emergency, you can use the export ban, but it will only cool the competition among key suppliers in the long term, because if prices are low, the incentive to invest in oil refining will sharply decrease,” the expert concluded.