Page 9 - FSUOGM Week 28 2021

FSUOGM POLICY FSUOGM

Russian wholesale gasoline

prices approach record highs

RUSSIA THE price of gasoline on the St Petersburg damper mechanism means they cannot jack up
International Mercantile Exchange (SPIMEX) prices without making their supplies uncompet-
The price spike has has approached its all-time record, amid rising itive versus those of rival, integrated operators.
put the squeze on international oil prices and increased summer The Russian Fuel Union, representing inde-
independent fuel demand for motor fuels. pendent filling station operators, has filed a
retailers. Prices for AI-95 and AI-98 gasoline grades letter to Prime Minister Mikhail Mishustin
increased by 0.8% at SPIMEX on July 7 to complaining that since December last year, the
RUB58,900 ($788) and RUB55,500 ($743) exchange prices for AI-92 and AI-95 gasoline
per tonne respectively. The holiday season has had increased by 25.6% and 29.7% respectively,
driven up fuel demand in Russia, while oil prices the Moscow-based Kommersant newspaper
have grown increasingly bullish in recent weeks, reports. In contract, retail prices have only
especially since OPEC+’s failure this week to increased by 4.6-4.9%.
agree on production policy in August. These conditions mean that independent
Gasoline prices are nearing the all-time high station operators have been running at a loss
that they reached in 2018. During that crisis, for a sustained period, putting them at risk of
high wholesale prices fed into high prices at bankruptcy and closure, the union warned in
pumps. That was until the government intro- its letter.
duced the so-called damper mechanism in The government has already taken sev-
Russian oil taxation, which gives suppliers more eral steps over the past year to try and stem
incentive to keep costs for motorists low. Under any further growth in wholesale prices. When
this mechanism, suppliers must pay more into prices spiked last summer, after fuel demand
the budget when indicative domestic pump rebounded faster than expected after corona-
prices are higher than export netbacks. Con- virus lockdowns were eased, the government
versely, they can collect a subsidy when the situ- raised the minimum amounts of gasoline and
ation is reversed. diesel that suppliers are required to sell on
While this has spared Russian motorists from SPIMEX. Then in May, the government set new
high prices, the current state of the market has rules obliging large integrated oil companies to
put pressure on independent filling station oper- plan how much fuel they intend to sell on the
ators. On the one hand, these operators must pay exchange in a given month. These measures were
high wholesale prices, while on the other, the seemingly ineffectual. ™

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