While the retail price increase may stagnate, it is unlikely to lead to a significant reduction.
The government is primarily monitoring retail prices. At gas stations, the average price of gasoline has risen by 2.77% since the end of last year. This growth rate has nearly matched the average inflation rate in the country, which reached 2.78% by March 23.
Experts surveyed by "RG" predict a straightforward reaction to the export ban. Exchange prices are expected to slow their growth, and may even decline. Retail price increases may halt, but there will be no significant price drops. Price dynamics will remain in line with inflation, but not beyond that. However, the end of summer and autumn are approaching, when prices typically rise much faster than in spring.
The export ban leaves producers with no choice about where to sell their products. There used to be an external market, where prices were higher, and a domestic market, where prices were lower, but now there are no options. Furthermore, with the external market closed, all volumes intended for it will remain within the country—supply will outstrip demand. Therefore, producers will have no option but to lower prices, albeit temporarily.
In a conversation with "RG," Yuri Stankevich, Deputy Chair of the State Duma's Energy Committee, noted that the export ban is a tool for rapid response that can temporarily stabilize the market, but it does not resolve structural issues. For consumers, it means a pause in price growth, rather than a noticeable decrease. For the industry, it adds another factor of uncertainty.
Everything has changed—from supply directions to geopolitics. According to Dmitry Gusev, Deputy Chair of the Advisory Board of the "Reliable Partner" Association and a member of the Expert Council for the "Gas Stations of Russia" competition, a complete ban on exports is necessary for market stabilization but strategically misguided. Instead of stimulating oil refining and creating conditions for oil companies to enhance the depth and volume of processing, we are closing off exports. We risk becoming unreliable suppliers of petroleum products in international markets. Given the current prices, we are not earning enough from petroleum products, although we could. We are forced to depend solely on crude oil profits.
As noted by managing partner of NEFT Research, Sergey Frolov, in the context of unpredictable situations, including unexpected refinery shutdowns and a lack of substantial gasoline production surplus—as well as the seasonal rise in demand—the export ban will only serve to slow down price increases. Hope for a significant reduction should be tempered. This applies to both wholesale and retail sectors.
The fact is that, from a profit perspective, most of the large refineries in our country have been oriented not towards the domestic market but towards exports. This is primarily due to the fact that we send half of the oil and petroleum products produced in our country for export. Exporting processed products with added value is significantly more profitable than exporting raw materials. This perspective has been fostered by the government's fiscal policy. The large tax maneuver (BTM) reduced the export duty on oil and light petroleum products (gasoline, diesel, jet fuel) to zero (which will end in 2024), but it increased tax collections on gross oil production. In other words, once oil is extracted, taxes are paid, and the value added is obtained through producing gasoline and diesel which are sent for export.
While periodic fuel crises in the country can be mitigated through export bans, they can only be "cured" by increasing gasoline and diesel production. Only when there is enough supply for both domestic and export markets, which we are capable of, will we be able to address the issue. However, no investor is likely to invest in building a new refinery, knowing that their market opportunity—i.e., profit-making prospects—could be abruptly curtailed.
Frolov points out that since the onset of the tax maneuver, investments in oil refining have already appeared unattractive, and in conditions of manual management and geopolitical unpredictability, the investment attractiveness of oil refining has dropped into negative territory.
Oil refining is a capital-intensive business with a long investment cycle, notes Stankevich. The industry is highly interested in the predictability of export and tax policies, margin stability, and uninterrupted transport infrastructure operation. When export windows are periodically closed—especially during favorable external conditions—companies lose profitability, which inevitably reduces the return on investments in modernizing refineries and restoring them after ongoing drone attacks, he believes.
In the immediate term, bans even demotivate the increase in fuel production when domestic prices become less attractive compared to export alternatives. In the long run, an increase in refining cannot be ensured through bans, but rather through technological modernization, tax incentives, steady export supply, and developing domestic demand, Stankevich asserts.
According to Sergey Tereshkin, CEO of Open Oil Market, the industry as a whole needs new solutions that can boost the profitability of oil refining and thus alleviate price pressure. For instance, reducing excise duties on the "federal" portion could help: currently, 74.9% of excise revenues from gasoline and diesel go to regional budgets, while 25.1% go to federal coffers. A reduction in excise duties by a quarter would improve refining economics. When it comes to the investment prospects for the sector, the safety guarantees for fuel infrastructure and the lifting of external restrictions on equipment imports for refineries are crucial. Without these, companies will struggle to sustainably increase fuel production, and regulators will have difficulty ensuring price stability.
Source: RG.RU
