HomeMediaLatest News"The price bubble will deflate"

"The price bubble will deflate"

06 October 2023

Gromov Alexey I. Principal Director on Energy Studies, Head of the Energy Department

Alexey Gromov, Principal Director on Energy Studies of the Institute for Energy and Finance, commented to the newspaper Novye Izvestia on the government decisions to stabilize the situation in the domestic fuel market.

On the morning of October 6, the Cabinet of Ministers posted a message about the systemic measures taken to stabilize the fuel market in the country.

According to Alexey Gromov, the measures taken by the government are "balanced and reasonable".

"The measures taken on prices, on the damper, and on diesel fuel are aimed at "cooling down" the domestic market," the expert said.

By opening the export of petroleum products, the government is aware that it is profitable: market conditions are good at the moment.

Commenting on other points of the package of government resolutions related to the situation on the fuel market, the expert also called them correct.

"The government has really estimated the situation with gray exports. The correct fee of 50 thousand rubles has been introduced. Previously, the duty was 20 thousand rubles, and in such conditions, the export alternative was more profitable for a number of sellers by the same 20 thousand rubles: companies still made a profit. The introduction of a duty in the amount of 50 thousand rubles is guaranteed to destroy the profit and the temptation of resellers to sell the product on the foreign market," Alexey Gromov explained.

Gromov called the government's decision to increase quotas for the sale of fuel on the domestic market a "compromise."

"The companies were fighting for the return of the damper, and the government was fighting for an increase in sales in the domestic market," he explained.

Distillate of stumbling

In general, the analyst considers the government's decision to be very "good and correct". However, there is a concern that the measures taken by the Cabinet of Ministers may not be enough to fully normalize the situation on the oil market. The "stumbling block", according to Alexey Gromov, in the near future may be the continued export of medium distillates, which has not yet been regulated in any way.

Medium distillates are semi-finished products that can be used as raw materials for the production of light petroleum products.

"The prices for medium distillates on the world markets are very good. Oil refining companies may be tempted to increase the export of medium distillates, which are not in particular demand on the domestic market, but in the end these supplies may affect the domestic market," Alexey Gromov believes.

Prices will collapse. But how much?

Alexey Gromov believes that the systemic measures taken by the government today will begin to have a positive impact on the domestic fuel situation in the country pretty soon. One of the accompanying positive factors of this process will be the seasonality of agricultural work.

"The situation will normalize. It is good for the market that we are moving away from high demand from farmers. There are about two weeks left — and the harvest will be over. An unprecedented increase in fuel prices occurred in July–August. There was also a small spike in prices at the beginning of summer, but not as critical as in the second half of summer. If everything goes smoothly now, the price bubble will "deflate", the market will return to the indicators of the beginning of summer this year," the expert predicts.

Gromov Alexey I. Principal Director on Energy Studies, Head of the Energy Department
You will receive notifications about the release of new materials on the site. We do not share email addresses with third parties and do not spam.
Thank you!
Your application is accepted.