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HomeLatest NewsGeorgy Bovt: Why there will be no more cheap gasoline - Rossiyskaya...

Georgy Bovt: Why there will be no more cheap gasoline – Rossiyskaya Gazeta

Date: July 18, 2024 Time: 15:11:45

There is an agreement with the main fuel producers to try not to exceed the inflation rate. Vertically integrated oil companies that own an extensive network of gas stations can afford a small negative margin in retail, offsetting losses in other areas.

Independent gas stations cannot afford this. Already in August they faced losses on some types of oil products, which they are trying to cover by selling related goods and services (which is why a bottle of water at a gas station costs much more than in a supermarket). The situation is even worse in the south of the country, where in several regions farmers complain at the same time about the shortage and the increase in diesel prices, in a context of low grain purchase prices, which cannot compensate for the fuel cost. In this sense, it was requested to temporarily suspend the export of petroleum products so as not to disturb collection operations. This whole situation also caused the devaluation of the ruble.

And now the time has come to mention the key word that now appears in all discussions about the fuel market situation: buffer. Since 2019, the most important mechanism to mitigate the impact of global price fluctuations on the domestic fuel market has been this tax deduction mechanism, which was designed to cover part of the “lost profits” due to the fact that Oil workers refrain from selling part of the fuel in the foreign market (in the case of favorable external conditions) in favor of the internal market.

Meanwhile, oil prices have been gradually rising this year. And in dollars. Against the background of Western sanctions, it was possible to rebuild logistics, achieving a reduction in the discount on Russian oil and oil products. Oil exports have become even more attractive to domestic producers. But payments from the Russian budget to oil companies for fuel dampers in August alone amounted to 185.9 billion rubles (compared to 110 billion rubles in July). In January-August compensation payments amounted to 838.9 billion rubles. It turns out that the oil companies are in “double chocolate”, both from rising world prices and from budget compensation payments. True, last year such payments amounted to the even more impressive figure of 2.16 trillion rubles (in 2021, a “pathetic” 674.5 billion). And last year there were no problems with internal prices, much less with fuel shortages. But it is worth considering that in 2022 there was still a relative decline in the economy, but this year it is the opposite.

Other circumstances were also superimposed: bottlenecks in logistics, repair work at oil refineries, growing needs of the army and, finally, devaluation and increased needs for foreign currency, even among oil workers.

According to the Ministry of Finance’s proposal, compensation payments will be halved from September 1. This had no immediate effect. And here many critics of the buffer as a method of containing domestic prices recalled their old forecasts, according to which this mechanism in itself does not stimulate the fall in fuel prices. And the larger the gap between foreign currency earnings abroad and ruble prices at home, the less the desire to limit the latter will be. The complex buffer formula provides for a certain price corridor linked to payments. In practice, the price always reaches the upper limit and, since compensation is also received retroactively, there is a temptation to “pawn” the higher price.

Some officials began to look everywhere for “the machinations of speculators”, or more precisely, traces of “shadow exports” of oil products, which on paper go to the domestic market, but in reality to the external market. In fact, if such supplies exist, they constitute a small portion of the market; We are not yet in the 90s. In general, there is a great temptation to directively reduce exports, mainly of diesel fuel. They have not decided yet and the reason is simple: now not much foreign currency enters the country through exports. Especially compared to last year. Oil and gas revenues fell by around 40% in the first months of this year (the European gas market, for example, collapsed). While imports have partially recovered, a significant portion of them is critical and cannot simply be cut. If we also deliberately reduce the export of oil products, the country may run out of currency and then we will see the dollar at 200 rubles.

What can be done? For example, increase mandatory quotas for the supply of gasoline (from production), slightly (but insignificantly) adjust exports, perhaps temporarily increase the brake. An increase in oil export duties by about a quarter from September 1, to $21.4 per tonne, could have a stabilizing effect. You can simply wait until October, when peak summer gasoline demand declines, but you can somehow guarantee a stable supply of fuel for harvest work.

However, don’t expect miracles. Gasoline prices will not be able to return to their previous levels. Traditionally it has risen in price in recent years around 7% annually, tending towards a conventional dollar per liter. This does not mean that at gas stations we will see a price of 100-110 rubles per liter (although in Europe the norm is 1.5 euros per liter). But, perhaps, price stabilization awaits us at a level of about 70 rubles per liter of AI-95, a little less for diesel. Basically, the question is this: either we remain “in the market”, accepting, among other things, the unpleasant consequences of market prices, or we return to administrative regulation with the inevitable accompanying scarcity and even more “terrible” prices. ” in the market. black market.”

* This website provides news content gathered from various internet sources. It is crucial to understand that we are not responsible for the accuracy, completeness, or reliability of the information presented Read More

Hansen Taylor
Hansen Taylor
Hansen Taylor is a full-time editor for ePrimefeed covering sports and movie news.

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