Authorities asked oil companies to curb prices at gas stations

According to Kommersant, at a meeting with Deputy Prime Minister Alexander Novak last week, officials called on oil companies not to increase the cost of fuel at gas stations. The meeting was convened in connection with the possible impact of the accident at the Nizhny Novgorod refinery on the gasoline market. Regulators are not yet preparing more significant steps, limiting themselves to recommendations to companies to saturate the market with fuel. Although gasoline rose moderately in price on the stock exchange almost throughout January, experts do not yet expect an increase in fuel prices at gas stations.

Regulators called on oil workers not to increase the cost of fuel at gas stations, several interlocutors told Kommersant following a meeting between Russian Deputy Prime Minister for Fuel and Energy Complex Alexander Novak and representatives of oil companies on January 19.

The key driver for the rise in fuel prices on the stock exchange, which also affects its price at gas stations, is a decrease in gasoline production at the Nizhny Novgorod refinery of LUKOIL due to the failure of one of the two catalytic cracking units (see “Kommersant” dated January 15). The second installation also experienced problems, but by now its gasoline production has been almost completely restored. The government’s press release following the meeting with Mr. Novak noted “the stabilization of fuel prices in the country and the absence of its shortage.”

Now the wholesale price of gasoline is at the level of the end of February 2023, but against the background of the accident at the Nizhny Novgorod refinery, it has been growing throughout the past week.

On January 19, the cost of AI-95 and AI-92 on the stock exchange increased by 1.8% and 1.6%, to 48.4 thousand and 45.3 thousand rubles. per ton respectively.

A number of Kommersant’s interlocutors expected that the government would name specific steps to saturate the market with AI-95 gasoline, but this did not happen. The government’s message spoke about oil workers’ plans to increase the production of gasoline and diesel fuel in 2024, as well as about optimizing the timing and schedule of refinery repairs.

The Ministry of Energy previously announced the possible redirection of part of gasoline exports to the domestic market. Due to the accident at the Nizhny Novgorod refinery, supplies of AI-95 gasoline to the market were reduced by approximately 200 thousand tons per month, while LUKOIL began buying gasoline from other manufacturers to supply its own gas stations.

January is traditionally the month of the lowest demand for gasoline in Russia, so there are currently no obvious prerequisites for a significant increase in fuel prices. But the authorities are being cautious, given the recent experience of last year’s fuel crisis.

The key reasons for the rise in fuel costs then were the rise in oil prices along with the weakening of the ruble, as well as the decision of the Ministry of Finance to halve damper payments for oil companies.

The cost of gasoline increased continuously from spring to autumn 2023, renewing historical highs. The government was slow to crack down for several months until it imposed an embargo on fuel exports in late September and also returned full damper payments, which eventually stabilized prices.

The cost of fuel at gas stations remains the subject of close attention by the FAS and the Ministry of Energy, especially on the eve of the March presidential elections in the Russian Federation. Authorities are trying to prevent prices at gas stations from rising above inflation.

According to Rosstat, in the first working week of January, gasoline prices at gas stations did not increase on average across the country. Although wholesale gasoline prices are still relatively low right now, gas station operators are tempted to gradually increase price tags to make up for last year’s losses.

Retail prices for AI-92 and AI-95 increased by 6.2% and 6.9% during 2023, Petromarket estimated, and did not exceed the inflation rate of 7.4% (according to Rosstat). Gas station operators are now making comfortable profits when selling gasoline. Thus, Petromarket notes that the net margin of fuel trading at gas stations was at the level of 7.3 rubles. and 8.3 rub. per 1 liter for AI-92 and AI-95, respectively. Analysts believe that “there are no prerequisites for a serious increase in retail prices in the near future.”

Dmitry Kozlov