Jun 21, 2021
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Will the government press the fuel oligarchs?

The situation with the global rise in commodity prices is forcing the government to increasingly abandon the mechanisms of liberal monetarism and use the instruments of state capitalism.

At the end of last year, after a devastating meeting with Vladimir Putin on the unprecedented rise in food prices, the government applied highly successful methods of market regulation. Export duties and quotas were introduced, as well as price caps for a number of goods. All this helped to keep food prices down: while it continued to grow in the world, at least it froze in our country, and in some cases (like, for example, for sugar) prices fell altogether.

Nevertheless, the rest of the industries have not yet undergone strict government regulation. Apparently, Putin’s instructions are decisive here, without which the White House is afraid to take the initiative. So far, we only see single attempts by statists (Belousov, Abramchenko) to fight against the import of inflation. But, apparently, soon certain decisions will be made on the oil product market.

And again the rise in prices

The price of gasoline and diesel is growing, if not multiple, then at a very alarming rate. But motor fuel, without exaggeration, can be compared with the transport infrastructure, which is the backbone of the economy. Without cheap and affordable gasoline, all industries suffer: from logistics to agriculture. That is why the government is obliged not only to contain, but also to reduce the real prices for motor fuel. Russia, as the largest oil-producing country, is able to provide domestic consumers with the most comfortable conditions in the world. Oil is our geographic advantage over other countries. We should not make money on it in the domestic market. On the contrary, low energy prices must be used for the accelerated development of high-tech industries, agriculture, industry, etc.

Nevertheless, since the beginning of the year, gasoline has risen in price by 4.1% with inflation of 3.7%. At the same time, the government declares its intention to ensure the growth of prices for motor fuel at a level not higher than inflation. Although the following point is not clear here. If inflation, for example, is 15% with a similar growth rate for gasoline, then the Cabinet will pretend that everything is fine?

Action must be taken quickly

Nevertheless, the government finally intends to act decisively. Within two weeks (that is, until July 1), the Ministry of Energy will determine the feasibility of introducing marginal prices for motor fuel in the wholesale segment.

A similar measure was already applied in 2018–2019 and proved to be effective. Then the so-called oil damper was developed. Its essence lies in the fact that the government compensates the oil workers for the difference between the export price and the domestic one. The goal is to stimulate companies to sell petroleum products on the domestic market.

The author of these lines raises a question: why should the state pay money to oilmen for its own oil? This is the property of our people, and not of a group of resource oligarchs. The government should not beg, but force oil workers to sell gasoline domestically at prices that it deems fair. Fortunately, it is in this direction that the Ministry of Energy is moving.

However, the current situation once again actualizes the question of the advisability of the presence of private companies on the oil market. We have a state monopoly on the gas market – Gazprom. The prices for blue fuel are indexed within the limits of inflation, there is no indignation of the population and business with the cost of gas. So why not repeat this positive experience in the oil industry?

Konstantin Dvinsky

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