The reasons for the increase in gasoline prices have outpaced inflation (8.4% compared to 4.16% as of September 22), and the increase in DF prices over the past month is 1% (3% since the beginning of the year, and if this trend continues, DF will surpass consumer inflation by November) is due to a sharp increase in wholesale prices, which are linked to exchange quotes. Gas stations need sources to procure fuel, and there are few alternatives to the exchange or oil depots. Large networks owned by oil companies can buy fuel directly from refineries (NPZ), but again, the cost is contingent on exchange quotes.
Exchange trading is influenced by various factors, including potential risks, information background, supply volumes, macroeconomic conditions, and quotations. Since early August, the rise in quotations has been fueled by unscheduled repairs at refineries due to drone strikes and the continuing risk that oil companies may lose budget compensations for keeping wholesale fuel prices on the domestic market lower than export prices (the damper). The latter is linked to crossing in August the exchange price for AI-92 gasoline (which serves as the benchmark for the damper) a level after which the damper resets (66,495 rubles per ton, with AI-92 currently trading at 73,821 rubles per ton). This raises the question: why have quotations surged?
Yuri Stankevich, Deputy Chairman of the State Duma Energy Committee, points out that the profitability of oil refining is low this year. Overall, vertical integrated oil companies (VINK), which cover the entire production chain - from extraction and refinement to selling finished fuel at their gas stations - are expected to see their profits cut in half compared to previous periods. The reduction in production, combined with increasing production costs, tax burdens, and excise duties, has created conditions for an "ideal storm," which has manifested itself in exchange, wholesale, and retail prices.
Experts believe that a ban on diesel exports will help halt the price increases for it.Moreover, as previously stated, the deficit pertains only to gasoline. The rise in wholesale and retail prices for DF is solely related to seasonal factors (demand increases in the autumn) and issues concerning the profitability of oil refining and retail trade. The reported closures of gas stations in some regions are more likely linked to negative trading margins than to a complete lack of fuel at the stations.
According to Dmitry Gusev, Deputy Chair of the board of the "Reliable Partner" Association and member of the expert council for the "Gas Stations of Russia" competition, even if there is currently a production deficit in the market, this is always covered by reserves created in winter and spring. However, this year, creating those reserves was difficult; gasoline prices did not rise in the spring (there was no incentive to buy, hold, and sell at a higher price), and interest rates were relatively high. Yet the fundamental problem of the fuel market is the low profitability of operations. There are no incentives to construct new refineries or gas stations, no general plan for the placement of gas stations, and discussing any investment attractiveness for the sector seems far-fetched.
Currently, to curb price increases, the government has already announced the extension of the complete ban on gasoline exports until the end of the year and a ban on diesel exports for non-producers (traders). Additionally, to maintain the damper payments for VINK, the upper limit of quotations, after which the damper resets, is planned to be raised by 10% for both gasoline and diesel.
According to Sergey Frolov, Managing Partner at NEFT Research, this ban will help contain prices for DF, as the entire volume exported by non-producers will be redirected to the domestic market. Conversely, no impact is expected on gasoline prices. Gasoline, it seems, will have to be imported to close local deficits (in the South and the Far East).
Sergey Tereshkin, director of the OPEN OIL MARKET fuel marketplace, agrees: a mere export ban will not suffice to emerge from the crisis. There needs to be a push to enhance supply in the domestic market, including through imports from Belarus, Kazakhstan, and other countries.
Stankevich asserts that directive restrictions will not lead to an increase in fuel availability in the market unless refineries quickly finish their unscheduled repairs. Therefore, all necessary measures must be taken to protect the facilities from new drone attacks. A return to sustainable surpluses of gasoline and diesel in the market will result in lower exchange prices. "I hope we will see such a trend in October," he says.
Prices will remain roughly at current levels over the next month. The only systemic solution is to complete the modernization program of refineries, which will help increase gasoline production volumes. And, naturally, there is a long-overdue need for a military solution regarding the protection of refineries, according to Frolov.
From Tereshkin's perspective, the main challenge of the current crisis lies in the risks of gasoline shortages triggered by necessary repairs at refineries. Moreover, the timelines for repairs are unpredictable due to US and EU sanctions on equipment supplies to Russia, the expert explains.
Regarding the damper, Stankevich believes that the decision to reconsider it is frankly overdue. However, better late than never. The profitability of oil refining is directly dependent on receiving reverse excise. Amendments to the Tax Code would allow the government to stay in line with its promises to keep retail prices in line with inflation. However, it is already evident that in 2025, prices will surpass the upper limit set by macroeconomic forecasts.
It is worth adding that currently, AI-92 quotations are above the potential upper limit for damper payments (72,740 rubles per ton). DF prices are nearing this limit as well (74,360 rubles per ton, now at 70,400 rubles per ton). Payments are calculated based on the average monthly value. It remains unknown how oil companies will react if the damper resets even after adjustments at the end of the month. It is also unclear when the changes in damper calculations will take effect, either from August 1 or September 1. If the latter, then in August, oil companies won’t receive payments.
Gusev believes that, considering that more than five years have passed since the introduction of the damper and the government-oil companies agreement to keep prices at gas stations within inflation limits, many changes have occurred and it is worth discussing new operational rules. This should take into account the changed conditions both globally and domestically. Instead of attempting to manually navigate yet another crisis, we need to acknowledge that the system has become inefficient and develop a new one — involving all market participants, according to the expert.
Source: RG.RU
