MOSCOW, August 22 - PRIME. The sharp increase in the exchange price of aviation fuel in Russia may be due to the lack of incentives for oil companies to keep prices in check, resulting from the rules governing payments under the damping mechanism, Sergey Tereshkin, CEO of the petroleum product marketplace "Open Oil Market" (a resident of Skolkovo), told RIA Novosti.

At the beginning of August, the price of aviation fuel on the St. Petersburg International Commodity and Raw Materials Exchange (SPIMEX) reached a historic high of 84,879 rubles per ton. Earlier on Thursday, the newspaper Izvestia, citing air carriers, reported that the sharp rise in jet fuel prices could pose a risk of localized shortages of this product. At the same time, the Ministry of Energy told RIA Novosti that aviation fuel reserves at Russian airports are sufficient.

"The key reason for the increase in jet fuel prices is that subsidies for this type of fuel are paid to airlines, not fuel producers," the agency's source said.

The damping mechanism was designed to restrain domestic fuel prices. In the case of the automotive fuel market, if the export price of gasoline and diesel exceeds the conditional domestic price, the state compensates companies for part of this difference to prevent price increases in Russia.

"In aviation, the damping mechanism only compensates airlines for fuel procurement costs but does not create incentives to restrain producer prices. This is the difference from the gasoline and diesel market," Tereshkin added.

Furthermore, according to the expert, price increases may also have been influenced by restrictions on the supply of foreign equipment for oil refineries. This has delayed the reactivation of secondary refining units that may have been out of operation.

The share of expenses on jet fuel purchases for domestic flights has remained virtually unchanged, the Federal Antimonopoly Service (FAS) of Russia told RIA Novosti.

"To reduce the volatility of end-user jet fuel prices, support measures are available for end consumers, such as aircraft operators. A damping mechanism and refundable excise taxes from the budget are also provided for airlines purchasing jet fuel. Subsidy programs are implemented for air transportation to the Far Eastern Federal District," the FAS noted.

Natalia Yakovenko, Managing Director for the Petroleum Products Market at SPIMEX, told RIA Novosti that the actual volume of jet fuel sold in August this year is comparable to the same period in 2023. Plans for jet fuel sales in August 2024 are 5.5% higher than the same period last year.

"The territorial exchange index for the European part of Russia as of August 20, 2024, decreased by 3.9% compared to August 1, 2024. However, during the period under review, there is a mixed trend in the index," she added.

In August last year, sales of jet fuel on SPIMEX amounted to 166,000 tons, which is 7% higher than in August 2022.

Translated using ChatGPT

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