MOSCOW, 17 Mar – RIA Novosti. Russia may face the risk of a repeat of the 2018 fuel crisis, according to the report on the work of the Accounts Chamber for 2020.
The auditors remind that the rise in fuel prices in May 2018 forced the authorities to take emergency measures. “At present, there are risks of a repeat increase in retail fuel prices and, as a result, the emergence of social tension,” the document says.
The Ministry of Energy, commenting on the situation, indicated that it had already taken a number of steps to curb the growth of retail prices for gasoline and diesel fuel, as well as to provide fuel to the regions and the profitability of filling stations.
The department also noted that the damper mechanism developed in 2018 continues to play an important role, minimizing the effect of fluctuations in world oil prices on the cost of gasoline in Russia. It is thanks to this that the prices at gas stations last year were kept within the framework of inflation, the Ministry of Energy added, recalling that, in particular, the retail price of AI-92 increased during this period by 2.2-2.5 percent with inflation of 4.9 percent.
Now, in order to respond to the changed realities of the world market, the Ministry of Energy and the Ministry of Finance are adjusting the damping mechanism towards its increase. According to Deputy Prime Minister Alexander Novak, the innovations may come into force on May 1. The source of RIA Novosti reported that in 2021 the damper can be adjusted only for gasoline, and for diesel fuel – in 2022.
In addition, in order to stabilize the situation on the fuel market, the loading of oil refineries is being increased, fuel reserves and its production are growing. Since March, the standard for sales of petroleum products on the exchange has also been increased: gasoline to 11 percent of the monthly production volume, diesel fuel to 7.5 percent and liquefied hydrocarbon gases (LPG) – also to 7.5 percent.
Last Friday, the average price of AI-92 gasoline on the St. Petersburg International Commodity Exchange following the results of trading on Friday amounted to 54,574 rubles per ton, being close to a record value in the entire history of observations since 2018. On Monday, the Moscow Fuel Association reported that average gasoline prices at Moscow filling stations have continued to rise for thirteen weeks in a row, and for the period from March 9 to 15, AI-98 gasoline has risen the most – by 9 kopecks, to 55.92 rubles per liter.
The damping mechanism was created to contain fuel prices on the domestic market in Russia. In general terms, if the export price of gasoline and diesel fuel is higher than the conditional domestic Russian price, then the state will compensate oil companies for part of this difference so that they do not raise prices in the country. And if Russian prices are higher than export prices, the oilmen share with the state part of their super-profits from domestic fuel sales.
Currently, indicative (notional) prices in the damper are indexed by five percent annually until 2024 inclusive. However, oil companies have repeatedly stated that the mechanism often does not take into account real market conditions, and such indexation outstrips the rate of inflation in Russia.