Plus 8 percent: what's behind the rise in fuel prices

This is due to lower export duties, higher excise taxes and a weak ruble. However, despite the oil price swing throughout the year, the retail price of gasoline did not exceed the inflation rate, experts say.

Yelena Ivanova, Natalia Seibil

2020 will be remembered not only by the fact that as a result of the pandemic the entire world economy stopped, planes stopped flying, production stopped and people sat at home, but also by the fact that world oil prices went into negative values due to Russia's withdrawal from the deal with OPEC ... By June, the situation had stabilized. On the wholesale domestic fuel market in November, prices decreased, but in December 95th gasoline rose by 7.7%, and 92nd - by 8.4%. Novye Izvestia turned to experts for an explanation of how the increase in wholesale prices will affect retail prices. Experts were divided.

If prices rise in the wholesale market, this is reflected in the retail market, some say. The production of petroleum products is a regulated industry, and government actions strongly affect the price. Since January, there has been a stage of tax maneuver, the export duty is decreasing, and the MET is growing. Vyacheslav Kulagin, Head of the Center for the Study of World Energy Markets at ERI RAS, says:

- Excise taxes on petroleum products are growing, and accordingly, it gives an increase to the markup for gasoline. The mineral extraction tax is increasing, the excise tax is increasing, then we look at the world market, oil is growing. Over the past 30 years it has always been this way, so now it would be a mistake to say that the price at gas stations will not rise. Everything is going in the same trend.

In 2020, gasoline prices rose 2.6% year-over-year, while inflation was 4.9%, Rosstat reports. According to experts, last year was relatively calm in terms of gasoline. And all because the government no longer wants a repeat of the situation in spring-summer 2018. After the launch of the damper, the internal fuel price stabilized, but fluctuations are possible, says Konstantin Simonov, director of the National Energy Security Fund, professor at the Financial University :

- I understand the concern in connection with the OPEC + deal and the January prices, and with the increase in oil prices, but it is not worth broadcasting the increase in the price of gas stations. Although it is obvious to me that the growth in the cost of gasoline in 21 years will be higher than in 20.

Fuel prices are determined by market and political factors. Market factors include the price of oil, which depends on the OPEC + deal. If it were not for her, with excess capacity and large oil reserves, with which the world has been living for the second year, prices will collapse. From how the regulation is maintained, their fluctuation occurs. The tax and excise policy has already played its role, and it will not be reflected in the wholesale and retail prices.

- During January there will be adjustments, but we will reach the equilibrium level of prices. The internal factor ceases to play here, except for point local events. Then everything depends on world dynamics, that is, on OPEC +. Will the prices go up or down, and how our prices plus the ruble exchange rate will follow. If world prices are relatively stable, and the ruble exchange rate is in the same horizon where it is now, then we should pass at a relatively stable level without significant fluctuations in oil prices, - Vyacheslav Kulagin believes.

The damper mechanism makes gasoline on the domestic market less volatile in terms of the cost of oil on the world market. The cost of production in Russia is calculated in rubles, taxes are added to it, which amount to 70% of the price. Oil companies continually assess the profitability of exports and domestic supplies. To smooth out the distortions, a damper mechanism was introduced. In 2019, oilmen received an additional payment from the state for refusing to increase exports and maintain the required volume in the domestic market. In 2020, everything was the other way around, and oil workers paid extra to the state for the opportunity to trade within the country. If the price starts to rise too quickly, the government will intervene, for this it has all the tools. But you shouldn't expect a drop in gasoline prices.

"If the government wants to reduce gasoline prices, I can tell you a mechanism - to reduce excise taxes, and prices will go down, but in a situation of budget deficit and falling revenues, the government will not take this step. The government has two options - either it lowers taxes, or it regulates its relations with oil companies, convincing them to keep prices by any means", - says Konstantin Simonov.

In December-January, we climbed one step up the price ladder. While talking about a price increase of 10% is impossible. However, OPEC + will discuss and monitor the situation on the world oil markets every month. Somewhere they can agree, but somewhere they don't, Vyacheslav Kulagin believes. The question of the ruble exchange rate remains open. It depends on what decisions will be made after the new US president takes office, and how they will affect the rate of the Russian national currency. Vyacheslav Kulagin says:

- If the ruble rose by 10%, this automatically means that, with the oil price unchanged in rubles, the oil sales price increased by 10%. And we have a direct link to export sales prices. Accordingly, the prices at gas stations must be corrected accordingly.

One thing reassures in an uncertain situation: the question that all gasoline will go for export, and nothing will remain inside the country, is not worth it. So far, the government prefers a damper in dialogue with oil companies. It has shown its effectiveness in 2019 and 2020. Last year, thanks to him, the budget received additional payments, and the price of gasoline practically did not grow.