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Mar 30, 2021
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The case smells like gasoline

The case smells like gasoline

Gasoline in Russia began to rise in price since the New Year holidays.

The authorities are reassuring: the damper mechanism should restrain the sharp rise in fuel prices. But oil traders believe that by the end of the year, gasoline prices may rise by 14%, which will repeat the 2018 fuel crisis.

Price fluctuations began on the wholesale fuel market, and Deputy Prime Minister Alexander Novak had to speak on this matter. The official claims that the increase in the cost of fuel in 2021 will not exceed the inflation rate. At the same time, everyone who gets behind the wheel knows that after the New Year holidays, the price tag at gas stations has grown. The fact is that a planned increase of 4% in the rates of fuel excise taxes on gasoline, diesel and motor oils has passed since January 1, 2021.

Analysts have calculated that, as a result, gasoline prices will rise to 4% by April. But then the rise in prices should slow down and stop by the summer. Will it happen? Economists explain that the fuel market is full, so there seems to be no reason to increase the price of gasoline.

And prices are also constrained by a damper mechanism. “In 2020, oil prices fluctuated very strongly from $ 20 to $ 50 per barrel, and AI-92 gasoline increased by only 2 percent at gas stations. To smooth out the effect of price fluctuations in the world market on retail prices, a damping mechanism is effective. As a result of its action in 2021, the growth rate of prices for petroleum products in retail will also remain within the inflationary limits, ”says Alexander Novak.

The essence of the mechanism is the difference between export and domestic prices for fuel. This difference can be both positive and negative. In the first case, the export price is higher, which means that it is more profitable to export oil products than to sell in Russia, and vice versa. The damper dampens sharp fluctuations in fuel prices. At the same time, when world prices rise above domestic Russian prices, the state compensates for some of the losses of the oil industry. And if on the contrary, then the oil companies already extinguish part of the price difference to the budget. In other words, if oil prices rise, refiners receive a tax subsidy. If the price of oil falls, oil companies pay additional taxes.

Now Russian oil companies have asked the government to change the principle of the damper mechanism. High oil prices and a decline in the value of the ruble led to an increase in domestic wholesale fuel prices, and this began to threaten the profitability of the retail business. Therefore, the damper mechanism will be adjusted. The updated damper will start working on May 1, 2021 and should maintain the stability of prices at gas stations.

However, despite the optimism of Alexander Novak, the Independent Fuel Union believes that the fuel crisis of 2018 may repeat itself in Russia and gasoline prices will simply skyrocket. By the end of the year, retail prices for gasoline and diesel may rise up to 14%. The Independent Fuel Union has already asked Russian Prime Minister Mikhail Mishustin to take urgent measures to stabilize the situation on the fuel market.

Marina Lepina.

Photo: ADOBE STOCK

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