The government has identified new measures to curb prices for gasoline and diesel fuel.

The Russian government has approved long-term measures to stabilize the country’s fuel market, the press service of the Cabinet of Ministers reported on October 6. In particular, the volume of payments to oil refineries for dampers will be restored.

The damper mechanism began operating in Russia in 2019 and called for smoothing out price fluctuations at gas stations. According to the rules, if the export price of petroleum products exceeds the price on the domestic market (notional domestic price, which is indexed annually), oil refineries (refineries) receive payments from the budget. If prices on the domestic market exceed export prices, the refineries themselves pay the state.

This mechanism is designed to make the supply of motor fuel to the domestic market profitable for refineries and avoid a shortage of fuel and lubricants. But from September 1, 2023, on the initiative of the Ministry of Finance, a coefficient of 0.5 was introduced into the damper calculation formula to halve payments against the background of the budget deficit. According to new government decisions, from October 1, the coefficient was increased to 1, that is, damper payments have been restored in full since October.

“This will provide economic incentives to saturate the domestic market with fuel, restrain the growth of wholesale exchange prices, which will ultimately help maintain a stable price situation in retail at a level close to inflation,” the government release says.

The Cabinet of Ministers also decided for the second time in a year to increase the mandatory standards for oil product sales for refineries on the St. Petersburg International Trading Exchange commodity exchange: up to 15% of total production for gasoline and up to 12.5% ​​for diesel fuel. “Vedomosti” wrote about this government decision on October 5. At the same time, sources said that this measure, along with a number of others, could be announced on Friday, October 6.

The previous adjustment to the standards for trading fuels and lubricants on the exchange came into force on September 1 and assumed their increase by 1 percentage point. up to 12% for gasoline and 9.5% for diesel. The government press service explained that this measure will give independent gas station networks the opportunity to buy fuel at market prices. It also reduces the risks of monopoly pricing, since many refinery owners also operate gas station networks.

To combat the gray export of petroleum products – the resale abroad of fuel purchased on the domestic market, for which a damper has already been paid – the government increased the protective export duty from 20,000 to 50,000 rubles/t for exporters who do not produce petroleum products themselves. According to the Cabinet of Ministers, in this way attempts by resellers to purchase petroleum products for future use on the domestic market will be suppressed in order to then sell them after the export restrictions are lifted.

The latest measure announced is the partial lifting of restrictions on diesel fuel exports. Now refineries that supply at least 50% of the diesel they produce to the domestic market will be able to export the rest via pipelines to seaports.

Such measures were introduced against the backdrop of a worsening fuel crisis that began in Russia in 2023. Due to more attractive export prices for petroleum products compared to domestic ones (this effect was caused by rising oil prices and the weakening of the ruble), companies began to increase fuel supplies abroad in the spring . As a result, wholesale prices on the SPbMTSB exchange began to rise in April, simultaneously with the beginning of the refinery repair season, and since July they have updated historical records. The situation worsened in the summer amid increased demand for fuel from retail consumers and farmers (Vedomosti wrote about this on September 12 and 22).

Against this background, the Ministry of Energy, the Federal Antimonopoly Service and the supervising Deputy Prime Minister Alexander Novak discussed various options for stabilizing the situation, but by September the decision was made only to increase the standard for fuel sales on the stock exchange. Months of discussions between officials and the industry did not yield results – wholesale prices continued to rise, which was also reflected in retail.

As a result, on September 21, the government introduced a complete indefinite (“until the situation stabilizes”) ban on the export of diesel fuel and gasoline. The government hoped that such a measure would reduce wholesale and retail prices for petroleum products on the domestic market and create fuel reserves. On October 4, Novak reported the creation of fuel reserves of 430,000 tons, as well as a drop in exchange prices by 16-20%.

Wholesale prices for petroleum products at SPIMEX began to decline on September 18 on news of the imminent adoption of new “drastic measures” by the government. For example, the cost of AI-92 gasoline from September 18 to 25 decreased by 21.4% to 55,451 rubles/t. But by October 6, the exchange price of gasoline increased by 3.5% to 57,372 rubles. Similar dynamics are also observed for AI-95 and diesel fuel.

A decrease in prices is also observed in retail: according to Rosstat, as of October 2, the cost of gasoline and diesel at Russian gas stations has decreased for the first time since the spring of this year. The cost of AI-92 over the previous week decreased by 0.4% to 51.41 rubles/l, AI-95 by 0.5% to 56.16 rubles, and diesel by only 0.1% to 64. 9 rub./l.

According to the director of the National Energy Fund, Konstantin Simonov, the return of full payments for the damper is a reasonable measure. Continuing the policy of strict regulation of the industry would lead to a drop in export revenues of the state and oil companies, overstocking of the Transneft pipeline system and problems with the production of winter diesel fuel, he notes. Simonov recalls that the damping mechanism was introduced in 2019 as part of a tax maneuver, which involved the gradual zeroing of the export duty and an increase in the mineral extraction tax (MET) by 2024. The damper became an effective tool in a situation where the domestic petroleum products market was losing in export profitability, the expert believes.

Payments under the damping mechanism are a tax deduction that the Ministry of Finance pays from oil taxes, and not a subsidy to companies, reminds Alexander Frolov, Deputy General Director of the Institute of National Energy. The announcement of a halving of payments, which was originally planned from July 1, spurred consumers to begin purchasing more actively on the stock exchange, as companies feared a decrease in oil refining amid a reduction in the damper. This, coupled with the start of the refinery repair season, led to a crisis in the fuel market, Frolov believes. Therefore, reducing the damper for oil workers was an unjustified measure, he emphasizes.

Senior analyst Alfa Bank Nikita Blokhin notes that restoring the damper, increasing exchange sales standards and increasing the protective export duty will normalize the situation on the market. Lifting the ban on diesel exports through the Transneft pipeline system will to a certain extent limit the outflow of diesel fuel from the country, but will also help relieve the overstocking of the transport infrastructure that arose against the backdrop of government restrictions.

On average, over the past nine months, about two-thirds of all diesel volumes were exported through the North and South product pipelines, the total throughput capacity of which is about 30 million tons of diesel per year, explains Blokhin. The Nizhny Novgorod and Volgograd oil refineries of Lukoil, as well as the Yaroslavl oil refinery (JV) are directly connected to the pipelinesGazprom oil” and “Rosneft”) and the refinery of “Surgutneftegaz”.

Frolov also believes that it is now necessary to abandon the use of currencies of unfriendly countries in the Tax Code: the damper formula uses the quotation of petroleum products based on Rotterdam, which is calculated in dollars, and the mineral extraction tax formula is linked to the dollar quotation of Brent. Simonov adds that the government could initially introduce measures to combat gray exports of petroleum products instead of reducing payments under the damping mechanism.