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Expert comments on the extension of the fuel price cap
The Russian Ministry of Finance agrees to increase the threshold for deviations of wholesale fuel prices from indicative levels by 10 percentage points – up to 20% for gasoline and up to 30% for diesel fuel, as previously reported by Deputy Finance Minister Alexei Sazanov. The corresponding amendments to the Tax Code will be adopted in the autumn. However, the decision on the possible retroactive application of this adjustment from August 1 remains with the government.
"The industry is at a point where regulators cannot avoid accommodating oil companies. Companies will need to invest significant resources in maintaining refinery infrastructure, including through subsidies from the dampening mechanism and proceeds from the sale of petroleum products. Therefore, the decision to change the dampening limits is justified, even though it carries risks for the retail market," he stated.
According to Tereshkin, such risks are unavoidable under current conditions. Increasing the limit for deviations of exchange prices for gasoline and diesel fuel to 20% and 30% respectively will make retail price increases more predictable. In this case, the upper limit for exchange prices of Ai-92 gasoline will rise from 66,495 rubles to 72,540 rubles per ton, while diesel fuel prices will increase from 68,640 rubles to 74,360 rubles per ton. According to Rosstat, as of September 8, the accumulated price increase for gasoline reached 7.2%, while inflation since the beginning of the year amounted to 4.03%.
Earlier, Deputy Prime Minister Alexander Novak instructed the Ministry of Energy and the Ministry of Finance to present proposals by September 10 on how to retroactively increase the deviation range of exchange fuel prices from indicative levels from August 1, so oil companies could receive budget payments under the dampening mechanism in September, according to the minutes of the meeting with Novak (which is available to RIA Novosti).
The dampening mechanism was created to contain domestic fuel prices. If the export price of gasoline and diesel fuel exceeds the conditional domestic (indicative) price, the government compensates companies for part of this difference to prevent them from raising prices in Russia. Conversely, if Russian prices exceed export prices, oil companies "share" part of their profit from domestic sales with the government.
The dampening mechanism is paid in favor of oil companies only if the export price of fuel exceeds the domestic price. Currently, according to the existing tax code, if the average exchange price in Russia exceeds the thresholds by 10% for gasoline and by 20% for diesel fuel within a month, the payments are nullified.
According to data from the St. Petersburg Exchange, the average price of Ai-92 based on the territorial index for the European part of Russia in August was 69,339 rubles per ton, exceeding the level at which the dampener is not paid.
Source: PRIME
