How oil prices affect the fuel market

Almost a month ago, when gasoline production in Russia fell seriously due to attacks by Ukrainian drones, in my column I proposed increasing fuel imports from Belarus and increasing budget subsidies for refineries (see Kommersant on March 19). Since then, the government has quite skillfully guided the industry through the most acute stage of a potential gasoline crisis, forcing oil companies to increase capacity at plants, improving logistics by giving gasoline priority in rail transport, and actually organizing imports from Belarus in the amount of 100 thousand tons of gasoline per month. At the same time, oil companies were able to very quickly repair more than half of the installations affected by the attacks, and the lack of fuel at the end of March – beginning of April was compensated from reserves.

Now the situation in terms of the volume of gasoline supply no longer looks as dangerous as it did a month ago. However, a new factor has emerged that could upset the market balance in the coming months—rising oil prices. Over the past month and a half, prices have risen by $10, exceeding $90 a barrel of Brent last week for the first time since October. Since the ruble has not strengthened particularly, the profitability of fuel exports from the Russian Federation has increased significantly. This is clearly visible from the difference in wholesale prices for diesel fuel, the export of which is allowed, and 95-grade gasoline, which cannot be exported since March – diesel fuel is 5 thousand rubles more expensive. per ton.

But since gasoline exports are closed, it would seem there is nothing to worry about. However, practice shows that this is not the case: if the gap between domestic and export prices for gasoline is large enough, ways are found to circumvent the ban. Thus, oil companies can reduce the production of commercial gasoline and instead produce its components – naphtha and reformate, the export of which is not prohibited. Efforts by regulators to ban the export of components could be disruptive, as some refineries produce naphtha but do not have secondary processing facilities to produce gasoline. In this case, an export ban may lead to a decrease in processing.

Actually, the simplest solution to the problem would be a targeted increase in the damper – budget subsidies for refineries – for gasoline production. The rise in oil prices and the fact that the ruble is not strengthening at the same time gives the Ministry of Finance additional budget revenues, which can be spent on a temporary (during the summer) increase in the damper. Otherwise, the Ministry of Energy will have to immerse itself in manual regulation of the industry to an even greater extent than now, in attempts to monitor the load of almost every large installation. It is difficult to say how successful this practice can be – it worked this March against the backdrop of the presidential elections, but did not bring much results last summer, when fuel prices soared following oil prices amid the weakening of the ruble.