Gasoline Market Quotes Remain Near Annual Highs Despite Export Ban

Gasoline market quotes continue to hover near annual highs, even after the export ban came into effect in early August. Although prices initially dipped following the announcement to reinstate the ban, they resumed their upward trend when the ban was implemented last week.

The price surge began in May, with the largest increase observed in AI-95 gasoline. Its prices have approached levels last seen during last autumn's fuel crisis. Since the export ban's reinstatement was announced on July 23, AI-95 prices have fallen by just 1,000 rubles to 74,047 rubles per ton. This remains a very high level.

In comparison, AI-92 prices have dropped by 3,000 rubles to 54,720 rubles per ton. According to the St. Petersburg International Commodity Exchange (SPIMEX), similar trends are observed in the over-the-counter market, where prices in direct wholesale transactions follow exchange dynamics, albeit with a delay.

Retail prices are also rising, albeit nearly in line with inflation. The Federal Antimonopoly Service (FAS) strictly monitors retail price increases, making it unlikely they will significantly exceed inflation. According to Rosstat, AI-92 gasoline prices have risen 5% since the beginning of the year, while AI-95 has increased by 5.2%. Inflation as of July 29 stood at 4.99%. Vertically Integrated Oil Companies (VIOCs), which control the entire supply chain from extraction to gas station sales, may prefer to offset wholesale losses rather than attract regulatory scrutiny.

Seasonal Pressures Add to Market Strain
August and September are traditionally challenging months for Russia’s fuel market. Gasoline consumption remains high as the holiday season continues, and diesel fuel demand surges with the start of agricultural work. Following the export ban, the primary tool to control gasoline prices is administrative regulation.

Deputy Chairman of the Supervisory Board of the Reliable Partner Association Dmitry Gusev notes that it is too early to assess the ban's effectiveness. The market requires time to rebalance supply and demand. He attributes the sharp rise in AI-95 prices to a mismatch between consumption patterns—where AI-95 accounts for about 52% of gasoline use, particularly in large cities—and the exchange sales structure, where AI-95 represents only a third of traded volumes. Current rules require companies to sell specific volumes of gasoline on the exchange without distinguishing by grade, a policy Gusev deems flawed.

Export Dynamics and Pricing Incentives
Contrary to some media reports, AI-95 is exported abroad, though in relatively small volumes. However, gasoline exports are generally limited compared to diesel fuel (DF). Gusev highlights that diesel is exported in significantly larger quantities, making up half of its production.

Energy expert Kirill Rodionov points out that AI-95 gasoline is excluded from damper payment calculations, unlike AI-92 and summer diesel. This absence discourages producers from restraining AI-95 price growth. The damper compensates oil companies for deviations between state-set benchmark prices and export prices within a margin of 10% for gasoline and 20% for diesel. The benchmark for gasoline is based on AI-92 prices (64,515 rubles per ton).

Policy Recommendations to Stabilize Prices
Sergey Tereshkin, CEO of OPEN OIL MARKET, suggests including AI-95 in damper calculations as a way to curb price growth, potentially coupled with reducing fuel excise taxes. For instance, excise taxes on Euro-5 gasoline are set to rise to 15,755 rubles per ton by 2025, compared to 5,530 rubles in 2015. Currently, 74.9% of excise revenues go to regional budgets and 25.1% to the federal budget. Adjusting the federal share could provide room for reform.

Alternatively, restricting diesel exports may temporarily curb gasoline price hikes. However, Gusev warns this approach could harm the oil refining sector by reducing diesel production, which far exceeds domestic consumption. Instead, he advocates increasing AI-95 production and revising exchange trading regulations.

Tereshkin also emphasizes reducing operational costs, such as railway transportation fees for fuel. In 2022, Russian Railways' freight rate for oil and petroleum products was 948 kopecks per 10 ton-kilometers, compared to 281 kopecks for coal. Eliminating indirect subsidies for the coal industry could help lower costs for oil companies.

These measures highlight the complex interplay of market forces, regulatory policies, and seasonal dynamics shaping Russia's fuel market.



Translated using ChatGPT

Sourse: https://rg.ru/2024/08/05/litr-ne-tronut.html