Russian oil workers will be paid extra for cheap gasoline at gas stations

Commodity companies received compensation for losses from fuel exports

The ban on the export of petroleum products from Russia, introduced at the end of September, has been partially lifted. Moreover, mining companies were given back compensation that regulated their income from fuel exports and stable fuel prices on the domestic market. Thus, the state is going to prevent an increase in the cost of gasoline and diesel at domestic gas stations. True, the federal budget will now have to sacrifice additional revenues from the previously introduced tightening of fiscal policy in relation to the raw materials sector.

The moratorium on foreign supplies of Russian fuel did not last even a month: in the twentieth of September, the government announced a ban on this type of export, but after several meetings of Deputy Prime Minister Alexander Novak with the leaders of industry giants, the position of the states changed. Manufacturers were allowed to supply diesel fuel, always the most in demand by importers, to seaports through pipelines, taking their word that at least half of the total output would go to the domestic market. For suppliers of petroleum products that do not have their own refining facilities, a protective duty of 50 thousand rubles per ton was introduced.

However, the main gift for commodity corporations was the resumption of government payments related to the export of hydrocarbons and the price situation in the country’s retail market. Until the middle of this year, oil companies exporting large volumes of “black gold” and able to increase their revenue by increasing world energy prices received from the state a so-called damper: compensation for maintaining stable domestic fuel prices. Thus, officials tried to prevent a significant increase in prices in gasoline retail and preserve the profits for oil companies that they could get by increasing foreign sales. The previously introduced adjustment to the fiscal mechanism essentially reduced fuel damper payments by 50%. Due to such a tax maneuver, as representatives of the government’s economic bloc predicted, the state could receive up to 50 billion rubles per month.

But this maneuver did not work: stock exchange quotations of finished fuel continued to grow, and a number of large consumers of fuel, in particular agricultural farms, announced a possible risk of rising prices for food products due to the increase in transport and other energy costs. “Against the backdrop of such claims, the tugging of the budget blanket began,” explains Igor Nikolaev, chief researcher at the Institute of Economics of the Russian Academy of Sciences. Oil workers tried to challenge the state’s unfavorable tax decision, and industry officials had to think about restoring compensation payments to mining companies that own the country’s most important processing complexes.

“Most likely, the next government decision regarding providing the domestic market with affordable fuel will not be the last,” says Sergei Vinogradov, head of a private regional gas station network. Less than a month ago, officials blamed the price hike on the owners of independent gas stations, who allegedly bought gasoline on the stock exchange, thus increasing the overall market price of fuel, and then sold the products purchased from the refinery abroad at double the profit. The state announced a fight against “gray” exports of petroleum products. However, gas stations that are not part of the structure of mining holdings still remain a transmission link for the supply of fuel from producers to consumers – not only to ordinary car owners, but also to farming groups or small manufacturing enterprises. “Such buyers use petroleum products for their own needs, without even suspecting the possibility of “gray” exports,” says Vinogradov. “From the point of view of macroeconomics, the state’s step towards oil-producing corporations is absolutely correct. But for peripheral, and especially regional consumers of gasoline and diesel, this government decision will not be a healing balm. Fuel tariffs at local gas stations will increase (after all, they do not participate in damper schemes), which will affect the increase in the cost of finished goods, including food products, locally.”