However, it is impossible for the increase in exchange prices not to reflect eventually on fuel prices at gas stations. Gas stations purchase fuel either through exchanges or from oil depots. Large networks owned by major oil companies may buy directly from refineries, but even they do not always do so. Since the beginning of the year, retail prices for gasoline have risen only by 2.4% and by 1.6% for DF, which is below the country's average inflation rate of 2.59%. Notably, the price of gasoline has seen a noticeable acceleration in growth since early March.
Against the backdrop of the Middle East crisis, there are ongoing reports of sharp fuel price increases abroad. The most significant case is in the United States, where prices have surged by 35%. Additionally, retail prices have increased more than wholesale prices so far.
Fuel prices have also risen in European countries and China, which is not surprising since they are net oil importers and the current oil quotes are stubbornly above $95 per barrel. What is concerning is that the average wholesale price increase in Europe has been around 9-10%, and in China, it is 11-12%, which is lower than in Russia. This indicates that while they are importing oil (and China is purchasing it from us), the increase in wholesale fuel prices has been sharper in Russia.
Yuri Stankevich, the deputy chair of the State Duma Committee on Energy, noted in a conversation with "RG" that the rise in exchange prices for fuel in Russia since the beginning of the Persian Gulf conflict is primarily linked to the export alternatives (the price of our fuel when exported). This effect is amplified by the seasonal increase in demand and supply constraints (refinery repairs, logistics).
According to him, the high tax component in fuel prices in the EU mitigates fluctuations in raw material prices, while in China, prices are largely regulated by the government. The Russian market is more sensitive to export conditions, and the damping mechanism (subsidy to oil companies from the budget for supplying fuel to the domestic market at prices lower than export prices) is currently not fully compensating for the rise in external prices.
The Middle East crisis has an indirect impact on us—through world oil and petroleum product prices. While there are no physical risks to domestic supply, the geopolitical risk premium is factored into the price, according to Stankevich.
The rise in exchange quotes for gasoline and diesel fuel is currently having minimal impact on their costs at gas stations.It remains unclear why wholesale prices are rising faster in Russia. The tax component in fuel here is not less than in some EU countries, and state control over the fuel market is comparably strict as in China, although prices there are certainly set by the government.
Open Oil Market's CEO Sergey Tereshkin believes it would be misguided to link the rise in exchange prices to the consequences of the Middle East conflict. What is more likely are the oil companies’ attempts to compensate for the losses they incurred in recent months. In January, the subsidies under the damping mechanism totaled only 16.9 billion rubles, which is 90% less than the previous year; and in February, oil companies had to additionally pay the budget 18.8 billion rubles. With fewer subsidies, the profitability of oil refining decreases, leading oil producers to increase prices for better margins.
However, the damping mechanism is expected to grow in March, and the April payouts (based on March data) will likely reach the maximum levels for 2024, exceeding 130 billion rubles. It is unlikely that oil companies are ignoring this factor.
Sergey Frolov, managing partner at NEFT Research, believes the increase in exchange prices was inevitable under the current circumstances. The market effectively faced a double blow—an increase in the mineral extraction tax (MET) due to the rising global oil price and an increase in export alternatives for fuel producers. The only mechanism preventing a price surge is the damping system. However, this temporary mechanism to contain price rises after a tax maneuver (the elimination of export duties and the rise in the mineral extraction tax, which will conclude in 2024) has been made permanent. It was developed based on certain macro parameters and only operates correctly within a narrow range of external and internal conditions, which is why it needs constant adjustments (sometimes several times a year). The expert believes that the only long-term solution to this problem is the return of the export duty system paired with changes to the MET calculation formula. He suspects that an export duty could be added on top of the existing mechanism.
Nonetheless, none of the experts expect a drastic increase in gas station prices. If oil prices continue to rise, exchange prices may experience further growth, Stankevich believes. However, retail prices at gas stations generally react more slowly and in a smoother manner—the increase will likely correlate with inflation dynamics.
The Middle East crisis indirectly affects the fuel market in Russia through global oil quotes.Dmitry Gusev, deputy chair of the supervisory board at the "Reliable Partner" association and a member of the expert council for the "Gas Stations of Russia" competition, is confident that as long as we are producing our own gasoline and diesel, they will be sold at prices determined by the Ministry of Energy and the Federal Antimonopoly Service. However, there is an issue: a lack of refining capacity is beginning to be felt (although only in the long term), and there are no incentives to increase it. As soon as Russia is compelled to import gasoline, prices will surge to global levels.
Tereshkin notes that exchange prices for gasoline and diesel are driven by a similar logic: prices rise when fuel producers need to offset financial losses. This principle is currently at work, leading to the price increases observed in March. However, diesel is produced in Russia at twice the amount needed for the domestic market, whereas gasoline production only exceeds demand by 10-15%. Given this discrepancy, the increase in exchange prices will impact retail prices for gasoline and diesel.
This week, fuel prices at gas stations in the Moscow region rose by nearly 20 kopecks. Car owners noticed price increases almost across all gas station owners. Experts attribute this price hike to instability in the global oil market due to the situation surrounding Iran.
According to the Moscow Fuel Association on March 23, the price of AI-92 gasoline increased by 21 kopecks over the week, reaching 63.58 rubles per liter. The price for AI-95 gasoline also increased by the same amount, making it 70.09 rubles per liter. The highest prices for AI-92 were found at "Gazpromneft-Center" gas stations, where the price is 64.57 rubles per liter, while at "Lukoil-CNP" the price is 64.37 rubles per liter, where AI-95 is also the most expensive at 71.70 rubles per liter, and at the "Teboyl" station, AI-95 costs 71.11 rubles per liter. Diesel fuel has risen in price by an average of 15 kopecks, now costing 76.98 rubles per liter, with "Trans-GAS" selling it for the highest price at 79.59 rubles per liter.
Price increases have been noted for several consecutive weeks, with weekly price rises averaging around 20 to 40 kopecks per liter. Furthermore, price hikes have been observed at gas stations of all major oil companies in the capital region.
As automotive expert Igor Morzharetto explained to "RG," there is no reason to be surprised by the rise in prices: "Price fluctuations in the oil market are directly linked to the military operations of the US and Israel in Iran. These have significant repercussions in both wholesale and retail markets. However, in Moscow, these fluctuations are minor. The government tightly controls the market, so sharp price spikes are not anticipated. Nevertheless, inflation has not been eliminated—this year, it is expected to be between 5% and 6%. Therefore, by the end of the year, AI-95 could rise to 72-73 rubles."
Moreover, the spring price increases for fuel are quite natural—this is a result of growing demand. The economy in the Moscow region is activating, particularly with increased agricultural activities, construction projects coming back to life, and urban dwellers using their cars more frequently in favorable weather.
Source: RG.RU
