The damper is no longer working: when will the frenzied wholesale gasoline prices break through at the gas station?

Yekaterina Maximova

Stock prices for gasoline have remained at historic highs since May. As an independent expert Kirill Rodionov reminds, for the period from May 31 to June 22, the cost of Ai-92 gasoline alone on the St. Petersburg Stock Exchange (SPbMTSB) soared by 10%.

The rise in prices, Rodionov adds, was preceded by the promise of the Ministry of Finance to cut payments on the damper, as well as the reduction of gasoline supplies to the stock exchange by oil companies.

Has the damper (or the so-called «Kozak protocol»), which for years allowed oil companies to restrain gasoline prices at the expense of compensation from the budget, ceased to be a «magic wand» for the Russian fuel market?

Valery Andrianov, an expert at the Infotech analytical center, associate professor at the Financial University under the Government of the Russian Federation, notes: now the state is trying to replenish the state budget. And one of the directions is the reduction of the damper.

He recalled that in 2019, payments on the damper amounted to 282.2 billion rubles, in 2021 year — 674.5 billion rubles (that is, the growth was almost three times). In the past, in 2022 — 2.01 trillion rubles.

«That is an absolutely incredible figure for last year. And such a record damper was due to the fact that the prices of petroleum products in Europe rose sharply, and since the damper is calculated by the difference between the price of petroleum products in Russia and in In Europe, then last year such a value turned out, » explains Valery Andrianov.

While the situation is under control. But the key word is for now. And how events can develop in an interview with Novye Izvestia was predicted by Valery Andrianov.

— When will stock prices «break through» to retail and gasoline at all gas stations in the country will start to rise in price by more than the official inflation rate?

-While wholesale prices are rising and constantly setting records on the stock exchange, although there is some increase in retail prices, but it is not of a critical nature. And it can't be worn, because the mechanisms of these two prices are not related to each other. That is, retail prices are regulated manually — based on an agreement between the government and oil companies.

Nevertheless, the growing gap between the wholesale and retail link is an alarming trend.

And if you do not interfere in this situation, then, of course, problems from the wholesale link will sooner or later affect retail, no matter how the government tries to restrain the growth of retail prices.

— But the state has already announced that due to the budget deficit, payments to oil companies will definitely go «under the knife».

-Yes, the task is to significantly reduce payments. And by the end of this year we are already seeing a reduction. If from January to May 2022 payments amounted to 1 trillion rubles, then for the same period in 2023 — 464 billion rubles. That is, payments have been reduced by more than half.

This leads to the fact that oil companies receive less revenue. And this is also superimposed on the fact that, of course, because of the embargo on supplies to Europe, the foreign market is not so profitable for them. Many companies are reorienting to new markets, trying to supply the Asia-Pacific markets, looking for certain narrow niches in other regions. On the one hand, this, of course, helps them to reorient exports, but, on the other hand, it is still not as profitable as direct deliveries to Europe, which were before.

Therefore, the sector of oil refining, production and supply of petroleum products is becoming less profitable for companies. One of the attempts to save the situation is still to translate it into prices. That's why we see an increase in wholesale prices. And so far, I repeat, this applies only to wholesale. But if we do not take any efforts on the part of the state, then we can expect an increase in retail prices behind them.

— The FAS has already expressed its position: the antimonopoly service has sent letters to oil companies, in which it is required to increase the volume of gasoline sales on the stock exchange.

-Indeed, here, probably, the most effective measure is to increase the mandatory rate of sales through the exchange. If I'm not mistaken, now gasoline sales on the stock exchange are 8,5%. Many experts (and I also support this) suggest increasing the supply rate through exchange trading to 12%.

In addition, it is possible to describe the proportion of different gasoline in this standard. If we look at what gasoline is missing, we will see that prices for the most popular Ai-95 gasoline are rising the most there, and its share in exchange sales is not so large. That is, it is less than the share in consumption. And in order to stabilize prices for the same 95th gasoline, you can separately fix the sales rate for it, and not for gasoline as a whole.

— That is, to conclude another agreement between oil companies and the state? The previous one — payments on the damper — did not fail for many years. Now, it turns out that the authorities unilaterally break this agreement and simply tighten the requirements for oil workers?

— Yes, for the most part it turns out that way. The agreement not to raise prices at retail was such a gentleman's agreement. In the expert community, it is called the «Kozak protocol», since the then Deputy Prime Minister Dmitry Kozak was responsible for these negotiations between oil companies.

Well, now there really is a certain violation on the part of the state — the so-called fiscal approach, when, after all, the interests of filling the state treasury are higher than the interests of long-term business development.

Of course, the issue of increasing budget revenues is very acute. For some time, oil workers, apparently, can and should endure, but at the same time it is necessary to think about what will happen in the long term, and how in the long term it will still affect both the industry and the economy as a whole.

— And when will it be reflected? And on motorists, and on oil workers?

— Here again, everything depends on the will of the state, that is, how severely it will restrict. The state still has strong leverage over oil companies. And we also see that as soon as prices rise, the threat of antimonopoly investigations immediately arises, the FAS is involved. Companies are threatened to restrict exports. It's not the first year that such a threat has appeared: as soon as gasoline becomes more expensive, the idea immediately appears: «let's introduce quotas for gasoline exports or stop exporting gasoline altogether for a while.»

I think, given the situation in Russia, after all, the state will keep gasoline prices. That is, no one will let oil companies let go of retail and seriously raise fuel prices. I think that prices will hold, because this is a very important social factor.

But at the same time, this will lead to the fact that the refining sales link will degrade. This is a matter of more than one year, but less and less money will be invested in the modernization of oil refining, in its maintenance.

In the medium and long term, this, of course, will lead to the fact that objectively there may be a shortage of certain types of fuel, when companies simply will not be interested in modernizing the industry, building new gasoline processing plants and so on. But again, I repeat, this is not a matter of one or even, probably, not two years.

— And there is already data on how much the marginality of the business has decreased now?

-The marginality of WINK (that is, vertically integrated companies) and independent companies are two different things. WINKs can afford to have negative margins on retail. Roughly speaking, they can sell gasoline at a loss. And independents can't.

Therefore, if we proceed from a tense situation, first of all we will undermine medium-sized businesses that own small networks of gas stations. And first of all, it will hit remote regions.

For example, in Moscow, in central Russia, there are WINKs everywhere, that is, their gas stations. But in There are quite a lot of regions in Russia where small local gas station networks are common. And the current situation can undermine them very much.

It is also possible to mention such a factor that in Russia does not have the same price of gasoline everywhere. In the Far East and in It is still higher in Eastern Siberia, and this is also due to very high tariffs, practically with the monopoly position of Russian Railways and the fact that Russian Railways maintains fairly high tariffs for transportation. Therefore, one of the ways to reduce this pressure on consumers is also stricter control over Russian Railways tariffs for the transportation of petroleum products.

Recall that in 2018, against the background of a sharp rise in gasoline prices at gas stations, the government concluded an agreement with oil companies to freeze fuel prices. In exchange, the oilmen were promised to reduce the norms of fuel supplies to the domestic market and increase compensation from the budget. As Kirill Rodionov noted in the Infotech review, the current crisis is the most serious since the introduction of the damper, which has been a key tool for regulating the fuel market since July 2019.