Ministry of Finance wants to halve payments to oil companies

The Ministry of Finance proposes to halve payments for the fuel damper during the year – from July 2023 to July 2024. This was announced by Finance Minister Anton Siluanov on April 28, 2023. As a result of the adjustment, the budget will save up to 30 billion rubles. per month.

The minister explained that now payments for the fuel damper “go to the margin of oil refiners,” and the mechanism needs to be adjusted to correct this situation.

The damping mechanism in the fuel market began to operate in Russia in 2019. It assumes that with higher export prices for petroleum products than prices in the domestic market, oil companies receive payments from the budget and have the opportunity not to raise prices in Russia. In the opposite situation, companies deduct payments to the budget. In 2022, the budget paid the oilmen a record 2.2 trillion rubles. according to the damper mechanism – 3.2 times more than in 2021. In March 2023, oilmen received 96.7 billion rubles. from the budget – 1.5 times less than a year earlier.

Siluanov recalled that a damper mechanism is needed so that the profitability of refineries when supplying petroleum products to the domestic market and for export is approximately equal. The budget paid companies the difference in prices at high export prices on the Western market, and the cost of oil products on it was calculated from the cost of Urals. Now, the minister explained, Russia does not supply oil products to the West, and now “it is also not clear” with the price of Urals.

“Therefore, at present, the damper, in fact, goes to the margin of oil refiners. The refiners’ margin today is 8,000 rubles/t, before it was less than 2,000 rubles/t. If you look where it comes from – due to the damper. It turns out that we pay the margin to oil refiners from the budget, ”concluded Siluanov (quote from Interfax).

According to him, the Ministry of Finance proposes to adjust the damper, reducing it twice a year. “This will give us savings on oil and gas revenues and reduce the shortfall of these revenues in the budget,” the minister specified. Siluanov explained that the damper will be adjusted by simply introducing a factor of 0.5. As a result, payments to oilmen will decrease by 30 billion rubles. a month, he added.

After the strengthening of anti-Russian sanctions because of the NWO in Ukraine, the European Union, the largest buyer of Russian oil products, imposed an embargo on their supplies. It came into effect on February 5, 2023, at the same time as the fuel price ceiling. The price cap for more expensive oil products (for example, diesel fuel and gasoline) is $100/bbl, for cheaper ones (fuel oil) – $45/bbl. As a result, Russia had to look for new buyers of oil products in Asia, Africa and Latin America.

The minister stressed that when adjusting the mechanism, it is important that the FAS controls fuel prices in the domestic market. “Now the most important thing is that our oil refiners do not try to create an upward trend in the prices of petroleum products,” Siluanov said.

According to Rosstat data as of April 24, since the beginning of 2023, retail fuel prices in Russia have changed insignificantly: the average price of all grades of gasoline has increased by 8 kopecks. to 50.92 rubles/l, and the cost of diesel decreased by 64 kopecks. up to 58.17 rubles/l.

According to Siluanov, the damper adjustment should not affect the cost of diesel fuel, but may put some pressure on gasoline prices. He stressed that since the Ministry of Finance does not have indicators of profitability in Western markets, the proposed option is “an absolutely fair decision.”

According to the asset managerBCS The World of Investments” by Vitaly Gromadin, the government is adjusting taxation because it is looking for ways to get a share of the excess profits of oil workers. He recalls that the authorities tried to build tax calculations based on a certain discount for Urals to the benchmark Brent (in May it should be $31/bbl), but the real discount has already fallen to $26-27/bbl. Reducing damper payments, Gromadin believes, is not the best option, as this will lead to an increase in fuel prices in the domestic market.

Since 2013, the Ministry of Finance has been using quotes from the Argus pricing agency on the basis of CIF (“price, insurance, freight”) in the ports of Rotterdam (Netherlands) and Augusta (Italy) when calculating taxes. But since December 5, 2022, as part of anti-Russian sanctions, sea supplies of Russian oil to the EU countries have been limited. From October, Argus began to calculate the quotation on the basis of FOB (“loaded on board”).

In 2023, several laws were passed that limited the maximum discount on Urals when calculating mineral extraction tax (MET), additional income tax (ATD), export duty and reverse excise. In 2022, an amendment to the Tax Code was also adopted, according to which, when calculating the damper, a discount on Russian oil is also taken into account.