Deputy Prime Minister Alexander Novak on July 8 instructed the Ministry of Energy and the Federal Antimonopoly Service (FAS) to ensure that fuel prices at gas stations do not rise above the inflation rate.

Since late May, retail gasoline prices have increased by more than 1.5% in a month, including a 0.5% rise in the last week of June. According to Rosstat, by July 1, gasoline prices had increased by an average of 86 kopecks during this period.

The Moscow Fuel Association (MTA) reported that this growth continued in July. From June 17 to July 8, the prices of AI-95 and AI-98+ gasoline at Moscow gas stations rose by over one ruble, while AI-92 prices increased by 95 kopecks.

The situation resembles last year when, by late summer, price increases at gas stations outpaced inflation, prompting the government to take urgent measures to curb the rise. These measures included a ban on gasoline and diesel exports, higher quotas for exchange-traded sales, and stricter FAS control over oil depots and gas stations. While these tools remain available to the government, this year’s situation is somewhat different.

Last year, retail price increases were linked to a sharp spike in wholesale fuel prices. At the time, AI-92 traded above 70,000 rubles per ton, AI-95 exceeded 75,000 rubles, and diesel fuel reached 74,000 rubles per ton. Currently, AI-92 is trading at 54,700 rubles per ton, AI-95 at 67,700 rubles, and diesel at 59,700 rubles per ton—at least 10% lower than last year. However, today’s retail fuel prices have surpassed last year’s peak levels. While this is concerning, it does not indicate a crisis. Fuel price growth is capped by annual inflation and is currently lagging by 1.3% (fuel inflation at 3.2% compared to 4.5% overall inflation since the start of the year). Still, the gap is narrowing rapidly.

Reasons Behind the Price Increase

Sergey Kaufman, an analyst at Finam, noted a noticeable rise in wholesale gasoline prices in the past 3–4 weeks, with AI-95 increasing by over 25% since early June. Although prices are significantly lower than last fall's peak levels, those levels were considered crisis-driven.

In September last year, the government halved the damper payments (compensations to oil companies for selling fuel domestically at prices below export levels). This led to wholesale prices exceeding the threshold for damper payments. Retail prices did not react immediately, and by October, full damper payments were restored, preventing gas station prices from responding to the peak. This year, there hasn’t been a sharp spike in wholesale prices. Instead, prices have been gradually rising compared to 2023 levels, excluding the fall crisis period.

According to Sergey Tereshkin, CEO of OPEN OIL MARKET, the price increase results from five factors: reduced fuel production, recovery of the automotive market, seasonal demand growth, rising refinery costs, and increased exports following the lifting of restrictions in May.

Future Expectations

If gas station prices catch up with inflation by summer’s end, government countermeasures are likely. Natalia Milchakova, a leading analyst at Freedom Finance Global, highlighted that last fall’s export ban proved effective in curbing prices, albeit with side effects, such as reduced fuel output, which could drive up prices in the medium term.

Tereshkin predicts that the current price surge will be halted by a new export ban. Permission to export gasoline (valid from June to late July) is unlikely to be extended into August 2024. However, the underlying causes of price increases persist, including refinery downtimes and rising production costs, ensuring higher growth rates compared to early 2024, at least until the end of the warm season.

Kaufman added that retail price increases remain moderate, with annual growth expected to stay below 6–7%. The upcoming return of Nizhny Novgorod and Syzran refineries from maintenance is expected to cool wholesale prices as refining levels peak in July-August. However, if this recovery is delayed, a quick return to export bans is likely.

Conclusion

No experts interviewed foresee a decline in retail fuel prices, citing the absence of conditions such as falling oil prices or reductions in refinery costs. The oil and refining sectors remain burdened by high taxes, which have increased even in years of budget surpluses. The FAS continues to tightly regulate gas station prices, discouraging significant reductions even during favorable market conditions. As a result, declines in wholesale fuel prices are unlikely to significantly impact retail prices.






Translated using ChatGPT

Sourse: https://rg.ru/2024/07/08/bak-pod-zaviazku.html