The ban on gasoline exports is fraught with shortages and rising prices

On September 21, Prime Minister Mikhail Mishustin signed a decree on “temporary restrictions on the export of motor gasoline and diesel fuel.” First Deputy Minister of Energy Pavel Sorokin explained that the ban is “indefinite” in nature.

The government did not take such draconian actions out of a good life. From the beginning of April to September 15, wholesale prices for AI-92 gasoline increased from 45 thousand rubles. per ton up to 70.5 thousand rubles. (+33%). AI-95 by September 15 rose from 50 thousand rubles. per ton to 76.4 thousand (+50%). Summer diesel fuel jumped by 46% – 73.758 thousand per ton.

At the beginning of the wholesale price rally, the Ministry of Energy promised to contain the rise in retail prices within the framework of inflation. But it didn’t work. According to Rosstat, the cumulative increase in the retail price of gasoline from December 2022 to September 11 amounted to 8.5%, and diesel – 7.3%. And this is much higher than both accumulated inflation and calculated in annual terms.

The price gallop and the growing shortage of fuel at gas stations could not but cause growing discontent among all groups of consumers. Farmers were especially outraged. Summer diesel fuel, which was urgently needed during the harvest and sowing of winter crops at reasonable prices, was washed out of the market right before our eyes. Minister of Agriculture Dmitry Patrushev was dissatisfied with the ineffective measures that the Ministry of Energy tried to stop the price surge. In particular, a 1% increase in the share of exchange trading in diesel and gasoline in August had only a minor and short-term effect. Patrushev began to publicly advocate an export embargo. It is difficult to overestimate the lobbying capabilities of the head of the Ministry of Agriculture. On September 20, during his report to the State Duma, the moment of truth came. First Deputy Energy Minister Pavel Sorokin, who was invited to the parliamentary hour, was accused by State Duma Chairman Vyacheslav Volodin of inaction and explained that an increase in fuel prices inevitably leads to an increase in food costs.

It was painful to look at Sorokin. Observers realized that things were rapidly moving towards the announcement of the most stringent measures of coercion to reduce prices. Exchange players reacted immediately. Quotes began to slide down even before the introduction of the export ban. Naturally, they then proceeded to fall.

Already at the end of the first “forbidden” day, the government decided to take stock of the first results. On the evening of September 22, Deputy Prime Minister Alexander Novak held a meeting with representatives of oil companies on the situation in the domestic petroleum products market. There has been a decline in prices on the St. Petersburg International Commodity and Raw Materials Exchange since the beginning of last week for all major types of petroleum products. Exchange prices for AI-92 gasoline in the European part of Russia have fallen by more than 20% since September 18, for AI-95 – by 22%, for summer diesel fuel – by 18%.

At the same time, oil workers assured that there was no shortage of fuel in the wholesale and retail segments. Reserves at refineries, oil depots and in Transneft reservoirs are quite sufficient. According to the Central Dispatch Department of the Fuel and Energy Complex of the REA Ministry of Energy, the total inventory of motor gasoline at refineries and oil depots as of September 20 amounted to 1.9 million tons. The inventory of diesel fuel at factories, oil depots and in the Transneft system amounted to 2.95 million tons.

At the same time, other petroleum products also fell in price. On September 22, Mazut dropped 2.91% to RUB 37,478. per ton. Liquefied hydrocarbon gases – 3.1% – 26,896 rubles, jet fuel – 14.99% – 68,762 rubles.

However, no softening of price tags directly at gas stations was noticed. But information is emerging from the field about the lack of fuel at gas stations in a number of regions. But it is known that there is a noticeable time lag between wholesale quotes and retail prices.

So can the government rest on its laurels? Do harsh standards inevitably lead to victory?

Not always. The final or at least temporary solution to the price problem directly depends on time.

Experts and participants in the fuel market mostly warn that the ban on the export of diesel and gasoline must be lifted in two to three weeks, or a month at most. But let us remember that Sorokin speaks of an “indefinite” embargo. Of course, this word can be understood as a temporary measure. However, in Tsarist Russia the term “perpetual” meant a life sentence.

Internal and external supplies of hydrocarbons are closely intertwined. First of all, this applies to summer diesel engines. Exports of motor gasoline are small – no more than 3 million tons annually. 85 million tons of diesel are produced in Russia per year. Of this, more than half (up to 45 million tons) is exported. Recently, the increase in diesel production has been carried out specifically for export contracts. Moreover, they are mainly oriented towards the European market. Last year, before the introduction of a maritime embargo on the import of Russian oil products (from February 5 this year), 77% of Russian diesel supplies came from the EU, the UK and Norway. Now, after a quick reorientation of exports, 30% goes to Turkey (from where, after some processing, to Europe), 11% each to Saudi Arabia and Brazil (these countries lack their own fuel).

It is also necessary to take into account that wholesale prices for diesel have increased this year not only here, but in the EU – by more than 50%. It is no coincidence that it is more than profitable for Russian producers, especially with the weakening of the ruble, to continue exporting diesel to the EU, at least in a roundabout way.

The export ban leads to a monthly loss of the domestic fuel and energy complex of about $4 billion from diesel contracts alone. The budget is short of 50 billion rubles. In addition, there is a danger of losing part of foreign markets – for example, Brazilian. Currently, diesel imports from Russia to this country are already 67%. A year ago – zero. If we delay lifting the ban, the Brazilians will return supplies from the United States.

True, the Chinese unexpectedly intervened in the situation with our hydrocarbons. Back in July, Beijing suspected the possibility of limiting the import of diesel from Russia, the supply of which they also increased this year. Therefore, the Celestial Empire has significantly increased purchases of light-sulfur ESPO oil, from which the best grades of diesel fuel are obtained. As a result, the notorious discount fell from $15 per barrel to zero. That is, the quotes of this “cocktail” are equal to the reference Brent. Moreover, according to Bloomberg, October ESPO futures are trading at a 50-cent premium. By the way, ESPO exports reach a third of the export balance. At the same time, our export brand Urals is also becoming more expensive.

So the death of discounting is not far off.

This price distribution on external hydrocarbon markets is, of course, beneficial to us. However, the internal market situation may worsen. Oil workers warn that soon oil product storage facilities will be filled with excess diesel fuel, and then production at refineries will have to be reduced. Renewing it will not be easy.

As a result, the Russian motor fuel market, having closed the circle, will return to the summer deficit, and therefore to a new surge in prices, both wholesale and retail. Thus, the price situation, even if the price of automobile fuel continues to fall, remains unstable, and the risks of a new round of price increases have not gone away.

The solution is to urgently, no later than November 1, replace the general export ban with more flexible market regulation measures. There is hope for this. According to Anton Rubtsov, director of the oil and gas refining department of the Ministry of Energy, the government is working on “adjusting the tax system” in order to provide fuel to the domestic market at reasonable prices, regardless of the external situation. Apparently, we are talking about some increase in export duties and dampers. In any case, the Chairman of the State Duma Committee on Energy, Pavel Zavalny, is calling for these steps. A draft presidential decree has also been prepared allowing oil exports only to producers.

The government has already taken the first step towards easing the ban on the export of diesel and gasoline. On September 25, a decree was published allowing the export of marine fuel (this can be marine fuel oil or diesel fuel), gas oil (fuel inferior in quality to classic diesel) and middle distillates. Down and Out trouble started…