Currently, amid the Middle East crisis, there are ongoing reports of a sharp rise in fuel prices abroad, particularly in the US, where prices increased by 35%. Notably, retail prices have risen more significantly than wholesale prices.
Fuel prices have also risen in European countries and China, which is unsurprising as they are oil importers, and oil prices currently refuse to drop below $95 per barrel. What is concerning is that wholesale price increases in Europe averaged 9-10%, while in China, they were 11-12%, which is lower than in Russia. This indicates that while they are importing oil (with China purchasing from us), fuel prices are rising more sharply in Russia.
As noted by Yuri Stankevich, Deputy Chairman of the State Duma Committee on Energy, the rise in exchange prices for fuel in Russia since the onset of the conflict in the Persian Gulf is primarily related to export alternatives (the price of our fuel when exported). This effect is further intensified by seasonal demand increases and supply limitations (refinery repairs, logistics).
According to him, in the EU, high taxes on fuel help to stabilize fluctuations in raw material prices, while in China, prices are largely controlled by the government. The Russian market is more sensitive to export conditions, and the damping mechanism (subsidies to oil producers from the budget for domestic fuel sales at prices below export levels) currently does not fully offset the rise in external prices.
The Middle East crisis indirectly influences us through global oil and petroleum product prices. There are no physical risks for domestic supply, but a premium for geopolitical risks is included in the price, Stankevich clarifies.
The growth in exchange prices for gasoline and diesel fuel is not yet significantly affecting their cost at automotive filling stations.However, it remains unclear why wholesale prices are rising more sharply here. The tax component in fuel is no less than in some EU countries, and government control over the fuel market is as stringent as in China, where prices are indeed set by the state.
Sergei Tereshkin, CEO of Open Oil Market, believes it would be a mistake to link the rise in exchange prices to the consequences of the Middle East conflict. Instead, what is observed is the desire of oil producers to compensate for losses from recent months. In January, the subsidies amounted to only 16.9 billion rubles, which is 90% less than the previous year; in February, oil producers even had to contribute an additional 18.8 billion rubles to the budget. As subsidies decrease, so does the profitability of oil refining, which increases the incentives for producers to boost margins through price increases.
Nevertheless, in March, the subsidies are expected to increase, and the payments for April (for March’s results) will likely reach maximum levels for 2024, exceeding 130 billion rubles. It is unlikely that oil companies are ignoring this factor.
Sergai Frolov, managing partner at NEFT Research, believes that the current conditions made a rise in exchange prices inevitable. The market, in essence, has taken a double hit—an increase in the mineral extraction tax (MET) due to rising global oil prices and the growing export alternatives for fuel producers. The only mechanism that has kept prices in check is the damping. However, this temporary mechanism to contain price growth after tax maneuvering (which involves abolishing export duties and increasing oil extraction taxes, and concluding in 2024) is now permanent. It was developed under certain macro parameters and only works correctly within a narrow range of external and internal conditions. That is why it has to be altered constantly (sometimes several times a year). The expert believes that the only long-term solution to this issue is the reinstatement of an export duty system along with a revision of the MET calculation formula. However, he assumes that a new export duty will likely be added to the current mechanism.
Nevertheless, none of the experts anticipates a sharp rise in prices at filling stations. If oil prices continue to rise, exchange prices may increase further, notes Stankevich. However, retail prices at filling stations typically respond more slowly and in a more moderated manner—the increase is likely to correlate with inflation dynamics.
The Middle East crisis indirectly impacts the fuel market in the Russian Federation through global oil prices.Dmitry Gusev, Deputy Chairman of the Supervisory Board of the Reliable Partner Association and member of the expert council of the "Gas Stations of Russia" competition, is confident that as long as we produce our own gasoline and diesel, they will be sold at prices dictated by the Ministry of Energy and the Federal Antimonopoly Service (FAS). However, there is a concern: the shortage of refining capacities is already being felt (albeit only in the future), and there are no incentives for expanding them. Once Russia is forced to import gasoline, prices will surge to global levels.
Tereshkin observes that the logic behind exchange prices for gasoline and diesel is broadly the same: prices rise when fuel producers need to compensate for financial losses. This principle is currently in effect, explaining the price increases observed in March. However, diesel fuel production exceeds internal market needs by twofold, while gasoline production only slightly surpasses demand by 10-15%. Considering this disparity, the rise in exchange prices will reflect on the retail cost of gasoline and diesel fuel.
This week, fuel prices at filling stations in the Moscow region rose by almost 20 kopecks wholesale. Motorists have noticed rising prices across almost all filling station owners. Experts attribute this price increase to instability in the global oil market due to the situation concerning Iran.
According to the Moscow Fuel Association, as of March 23, the price of AI-92 gasoline increased by 21 kopecks over the week to 63.58 rubles per liter. AI-95 gasoline saw a similar increase, with a price of 70.09 rubles per liter. The highest prices for AI-92 were found at "Gazpromneft-Center" gas stations, where a liter costs 64.57 rubles, and at "Lukoil-CNP," a liter is priced at 64.37 rubles; here, AI-95 also exhibits the highest rates at 71.70 rubles per liter, while at "Teboyl," the price is 71.11 rubles. Diesel fuel, on average, has risen by 15 kopecks and currently costs 76.98 rubles per liter. "Trans-GAS" sells it for the highest price at 79.59 rubles per liter.
The price increase has been noted for several consecutive weeks, with weekly fluctuations amounting to approximately 20-40 kopecks per liter. Moreover, the price hikes have been confirmed at filling stations of all major oil companies in the capital region.
As automotive expert Igor Morzharatto stated, there is no reason to be surprised by the price increase: "Fluctuations in oil prices are directly tied to the military operation of the US and Israel in Iran. These factors significantly affect both wholesale and retail markets. However, in Moscow, these fluctuations are minimal. The government closely monitors the market, so sharp price jumps are not expected. Nonetheless, inflation remains a factor in play this year, with expectations of 5-6 percent. This means that by the end of the year, AI-95 may rise to 72-73 rubles."
Furthermore, the spring rise in fuel prices is quite normal—it is a result of increased demand. Economic activity in the Moscow region revives in spring, particularly due to heightened agricultural work; construction projects "wake up," and urban residents drive their cars more frequently during good weather, often heading to their cottages.
Source: RG.RU
