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Two hands for: oil companies want to limit their margin

The Cabinet wants to change the damper mechanism - the reverse excise tax, which reduces the dependence of fuel prices at gas stations on world oil prices. And also to limit the margin on gasoline and diesel. The Ministry of Finance proposes to introduce new rules from July, oil companies are asked to establish them in March. Experts believe that the new damper can bring an additional 200 billion rubles to the oil industry.

A new damper

The government submitted amendments to the Tax Code to the State Duma, providing for the adjustment of the damping mechanism for oil feedstock. Thus, the authorities want to stabilize the rise in prices for motor fuels.

The bill proposes to increase the compensation coefficient between the export price (netback) and the indicative (fixed by law) cost for gasoline from 0.68 to 0.83, and for diesel fuel from 0.65 to 0.83. At the same time, they want to reduce the permissible range of excess of the wholesale price over the indicative price for diesel fuel from 20 to 15%.

Simply put, the Cabinet of Ministers wants to prevent a sharp rise in the price of diesel fuel before the spring sowing campaign - a serious shortage of diesel has now formed on world markets, Moscow is trying to prevent this inside the country.

H4 Would wait for a new increase in the price of diesel / h4 situation with prices on the retail and wholesale diesel markets of Russia, they differ dramatically. If at filling stations the cost of fuel for the year increased within the limits of inflation - by 8-10%, then at the wholesale site it rose by at least 20% compared to the winter period of 2021. Amendments to the damper mechanism would help stabilize the crisis in the domestic commodity market. However, they should be approved as soon as possible, stressed the president of the Russian Fuel Union Evgeny Arkusha.

According to him, wholesale diesel prices will cool down only if changes to the Tax Code are approved by the beginning of spring, on March 1. This is due to the period of scheduled repairs at Russian refineries.

“We don’t have any particular problems with retail, it is well regulated – growth above inflation is unacceptable. But the situation in the wholesale market is really terrible. There, prices for diesel and gasoline increased by 20-30% during the year,” the expert noted.

He also called on the Russian authorities to adopt the amendments ahead of the deadline set by the Finance Ministry for early July. Otherwise, the explosive growth of wholesale diesel prices in the country will continue further.

“We are voting with both hands for the early adoption of amendments to the damper. We ask the authorities for only one thing - to make changes before the start of scheduled repairs at Russian oil refineries. In no case should you go along with the Ministry of Finance, which wants the amendments to come into force on July 1. The department, of course, will save budget funds, but the players of the enterprise will be in the red,” explained Arkusha.

Sergei Kondratiev, a senior expert at the Institute of Energy and Finance, agreed with him. According to him, the early approval of amendments to the Tax Code will curb the growth of retail prices for diesel by 2.5 rubles. And the oil industry can bring up to 200 billion rubles. additionally.

“With average annual prices of about $80 per barrel of oil and an exchange rate of 74-75 rubles per dollar, the government will additionally pay refineries from April to December 2022 about 100 billion rubles. for gasoline and the same for diesel. In this case, it will be possible to avoid a rise in diesel prices to 57.4 rubles. by the end of the year,” the analyst explained.

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Damper mechanism problems

Unlike in most countries of the world, the diesel shortage has only partially affected Russia. There is a surplus of this type of fuel in the country. A little less than half of the diesel produced is exported annually - 35 million tons out of 75 million tons. For this reason, even a sharp increase in domestic demand for raw materials in January-February 2022 by 15-20% compared to the same period in 2020 and 2021 will not lead to the depletion of diesel reserves in Russia, stressed Sergey Frolov, Deputy Director General of the National Energy Institute .

According to him, much more serious problems for the country's diesel market are the relatively weak exchange rate of the ruble and the high dependence of Russian wholesale prices for raw materials on Western quotations.

“The main problem with the damper is that it does not take into account the high volatility of our currency. Now the export alternative to summer diesel is almost 80 thousand rubles. per ton. Our fuel is traded at 56 thousand rubles. This is normal, but what will happen at an export price of 100,000 per ton? There will be an explosive distortion of prices in the domestic market,” the analyst warned.

The consequence of such a scenario will be a multiple increase in the financial burden on Russian oil producers. As a result, the next step will be an increase in the cost of raw materials both at the wholesale and retail sites, Frolov noted.

Kondratiev agreed with him. In his opinion, in this scenario, retail filling networks, with a high degree of probability, will start trading at a loss. The result of all this may be the risk of mass ruin of private gas stations in Russia.“In our country, once every two or three years, there is a stable situation when, at high prices on world markets, fuel begins to be redirected for export. In 2022, a record increase in the supply of Russian diesel to the United States was a clear example. Large companies are insured against the negative impact of the global market. Independent gas stations are forced to buy fuel in the wholesale market at much higher prices,” the expert noted.

In this regard, reducing the allowable range of excess of the wholesale price over the indicative cost of raw materials for diesel fuel will only partially cope with the negative situation for private companies. The fact is that such a mechanism will be very difficult to apply in Russian realities.

“In this scenario, the FAS will have to build a complex system for identifying indicative prices for individual regions. Formally, independent oil depots can simply buy raw materials at inflated prices, and then raise selling prices by the same 15% of the “permissible” margin. Otherwise, how can they beat off the increased costs, ”Kondratiev asked.

Will the fuel crisis drag on

Russians should not expect the end of the fuel crisis before the end of 2022. The cooling of world oil prices and the reduction of the internal cost of gasoline and diesel in the country will become possible only if sanctions on the sale of raw materials are lifted from Iran and Venezuela. In this scenario, the volume of supply on the global market will be able to meet the growing demand, Kondratiev emphasized.

“If the US manages to return to the nuclear deal with Iran and the embargo is lifted from the country, this will increase the supply of raw materials by 0.5-0.7 million barrels per day. The lifting of restrictions on oil trade from Venezuela will lead to an additional increase in world supply by 0.1-0.2 million barrels per day. Saudi Arabia and the UAE can also provide significant assistance in changing the OPEC + deal, ”the analyst suggested.

Otherwise, a number of sectors of the Russian and global economy will continue to suffer from rising diesel prices. Automotive, agriculture, maritime, rail logistics and food trade will be among the biggest losers.

“The lack of diesel will lead to an increase in food inflation at an average annual level of 10-12% both in Russia and in Europe. In sowing activities, diesel is actively used by farmers to operate tractors, which take an average of 60-80 liters of fuel to fill the tanks. The growth of expenses will force farmers to raise selling prices for grain and cereals.

We can’t expect the opposite yet - retail diesel prices are likely to remain high until the end of 2022,” the expert concluded.

Two hands for: oil companies want to limit their margin