The government has not yet agreed on the reduction of budget subsidies for refineries

The Russian authorities cannot make a final decision on the revision of budget subsidies for oil refining. Despite the desire of the Ministry of Finance to halve the damper payment from July, the government in May did not agree on the relevant bill and did not submit it to the State Duma, which automatically shifts the date of its entry into force until at least August 1. According to Kommersant, a longer delay is also possible – until the end of the season of high demand for fuel, as the authorities are concerned about the growth of wholesale prices and their potential increase at gas stations.

The government still has not agreed on tax adjustments for the oil industry, which were supposed to come into force in the summer, several Kommersant’s interlocutors told. In April, Finance Minister Anton Siluanov amid an increase in the budget deficit announced halving damper payments for gasoline and diesel fuel from July. According to Mr. Siluanov’s estimates, this will save the budget 30 billion rubles a month on the damper. According to preliminary estimates by a Kommersant source in the industry, the total payments for May on the damper could amount to about 75 billion rubles.

However, the amendments to the Tax Code were not submitted to the State Duma in May, which automatically shifts the possible start of their application to at least August. According to the law, at least one tax period must elapse between the adoption of a law on tax changes and its entry into force, which, according to the damper, is a month.

Now, according to Kommersant’s interlocutors, the issue is under discussion, which is supervised by Deputy Prime Minister Alexander Novak.

The Ministry of Finance told Kommersant: “The issue is being discussed in the government, no final decisions have been made.” Alexander Novak’s secretariat declined to comment.

According to Kommersant’s sources, the uncertainty arose due to the government’s fears that reducing the damper during peak summer fuel demand would lead to too much price growth. Since the beginning of April, the cost of AI-95 and AI-92 on the SPIMEX exchange has already skyrocketed by 19-20%. At the same time, prices for AI-95, despite the calls of the Ministry of Energy and the government to increase fuel shipments on the stock exchange, continue to update record values. May 31 AI-95 went up by 0.57%, to 61.1 thousand rubles. per ton. The increase in wholesale prices must inevitably lead to a certain increase in prices at gas stations, because, although the government tries to keep them within the limits of inflation, gas stations cannot operate at a loss for a long time. According to Petromarket, the net retail margin of AI-95 and AI-92 is already less than 1 ruble. per litre.

One of Kommersant’s interlocutors claims that due to the reduced refining margin due to the damper reduction, oil companies can redirect more oil for export and, consequently, the supply of petroleum products on the domestic market will decrease. Russia has already cut oil production this year by 500,000 barrels per day in agreement with key OPEC members, and companies cannot simply increase production without government approval.

According to the majority of Kommersant’s interlocutors in the oil industry, the decision to adjust the damper may be postponed until autumn or even revised towards a smaller reduction in payments.

One of Kommersant’s sources, close to the oil company, complains that “it’s wrong when the rules of the game change every three months.” In his opinion, it would be fair to provide tax incentives to oil companies in return for reducing the damper.

Together with the damper, the Ministry of Finance planned to change other parameters of oil taxes, including the size of the maximum discount for calculating the Urals quote in the MET formula and the export duty. From July, the maximum discount will be $25 per barrel, but the Ministry of Finance proposed to reduce it to $20 per barrel from September. This issue, according to Kommersant, has also not been resolved and is still being discussed.

The government is facing a dilemma – either to refuse to adjust the damper, or to face a new wave of rising fuel prices in wholesale and then in retail, said Sergey Kondratiev from the Institute of Energy and Finance. He notes that the transfer of the increase in wholesale prices to retail has already begun: on May 15–22, the cost of gasoline at gas stations increased by 0.2% compared to a week earlier (by 0.6% by the beginning of the year). Thus, in his opinion, a significant change in the conditions for calculating the damper can become an important pro-inflationary factor, and the rejection of such a decision, at least temporarily, is fully justified.

Dmitry Kozlov