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Monday, October 24, 2016

Petrol anomaly

The increase in the market price of gasoline this year already has outpaced inflation. Retail price increase is not so noticeable, but it is long. Soon prices at the pump jump, and after gasoline and prices will rise for all consumer goods.

photo: Gennady Cherkasov

At the end of June the stock price indices of oil products on St. Petersburg international Mercantile exchange (SPIMEX) reached a historical maximum. The index of the mass of fuel AI-92 by the end of June reached a value above 42 thousand rubles per ton, equivalent to about 31.5 rubles per liter of fuel. The growth level of the last trading day of the exchange in 2015 amounted to 33,4%.

In fairness it should be noted that stock quotes are indicative values, they do not always coincide with the average wholesale prices of the real market. But in General they show the right direction of price movement, including in the retail market.

Therefore, the surprise, rather, should call it stagnation in retail prices. The average retail price of gasoline AI-92 at the gas station of Russia in the end of 2015 amounted to, according to Rosstat, 33.95 ruble per liter, that is, it was 43.7 per cent higher than the stock market. If this ratio remained constant, the current retail price of 92-octane gasoline would have reached 45 rubles per liter. But this is not so, now the cost of gasoline at the pump by at least 10 per day — on 20 June, the average retail price of AI-92 in Russia was 34,65 rubles per liter. The growth of average prices at the pump of the country since the beginning of the year barely exceeded 2%, which is not only far from the exchange rise by 33.4%, but below the official rate of inflation: Rosstat published the consumer price index rose for six months by 3.3%. Such a discrepancy may be hiding an underlying buildup of price distortions. And this is extremely dangerous: the price of gasoline in such circumstances, can at any time to demonstrate the abrupt increase.

Thus from a fundamental point of view the main factors of rising prices of gasoline are increasing raw material prices and increase of excise taxes on motor fuel. In 2015, the structure of retail prices of gasoline the cost of raw materials (including deducted additional income from by-products) accounted for about 40%. As we remember, from December 2015 to June 2016 global oil prices rose exactly one-third (from 36 to 48 dollars per barrel). But given the decline during this time of the dollar by 7.14% (from 70 to 65 rubles), the ruble prices for raw materials has changed significantly less. But still they rose from 2.5 to 3.1 thousand rubles per barrel, or 24%. And if the share of raw materials in the structure of prices of gasoline remained unchanged, then only one factor would lead to an increase in fuel prices by 9.6%.

Let’s add to this the fact that the government has already twice this year (1 January and 1 June) increased the excise tax on motor fuel. A General increase of the excise amounted to almost 63% in six months. Last year, the excise tax amounted to 6.2 thousand rubles per ton, or 4.64 ruble per liter; YTD — 7,54 thousand rubles per ton (about 5.62 ruble per liter). Currently, the excise tax is equal to 10 and 13 thousand roubles for ton of gasoline, or 7.55 ruble per liter of fuel, and is already about 20% of its price. The share of excise tax in gasoline grew almost by 2.9 ruble, which should push the price up another 8.5%.

Thus, it is surprising is not the fact that the growth of market prices for fuel, but rather a lack of increase in retail prices at the pump. It is obvious that vertically integrated oil companies with their fuel producers and their retail service station network, under the pressure of competition and declining purchasing power hamper the growth of retail prices, redistributing costs within corporations. But it is also obvious that their potential is on the wane, and a coiled spring retail prices can go at any time. In this case, retail prices for motor fuel may rise by 15-20% in a short time. And it will affect not only car owners: at a comparable price will increase and the cost of all transportation, and that means more expensive goods in most stores.

Rising prices and a falling ruble. Chronicle of events

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