The government may introduce fuel export quotas

Rising gasoline prices forced the government to threaten oil companies with quotas on fuel exports. A similar idea was already discussed during the 2018 fuel crisis, but then the government stabilized the situation with the use of a damper. However, now the authorities are reducing damper payments, which has significantly reduced the effectiveness of this mechanism, and the growth of export netbacks encourages companies to increase exports.

The government returned to the idea of ​​quoting gasoline exports. Deputy Prime Minister Alexander Novak instructed the Ministry of Energy to work on this issue following a meeting with oil companies on June 30, which was devoted to the wholesale fuel prices that have grown in recent months. The essence of the introduction of quotas is to set the directive volumes of deliveries to the domestic market and abroad in order to reduce domestic prices that depend on the export alternative.

Now regulators already strongly recommend that oil companies supply maximum fuel to the domestic market, but these recommendations are not legally binding (see “Kommersant” dated June 30). The FAS also threatened companies with antitrust investigations until these verbal interventions had a significant effect.

The last time gasoline export quotas were taken seriously discussed under Deputy Prime Minister Dmitry Kozak during the 2018 fuel crisis, when prices rose amid rising export netbacks. Then the authorities eventually developed a damper mechanism, in which the budget subsidizes fuel supplies to the domestic market with a high export netback, and the need for directive methods disappeared. This year, the government has started to cut damper payments in order to reduce budget expenditures.

According to the majority of Kommersant’s interlocutors in the industry, the statement of the Russian authorities now looks like another verbal intervention.

So far, none of the regulators is ready to take drastic steps, hoping that oil companies, as repairs are completed at refineries, will increase fuel production, which will lead to a correction in wholesale prices.

Several of Kommersant’s interlocutors are also ironic that the last month, the reduction in exchange prices for gasoline occurs only on special days – after the FAS exchange committee (on Wednesday) and the headquarters of the Ministry of Energy (on Thursday).

A Kommersant source in the fuel market notes that the idea of ​​export quotas could lead to a reduction in oil refining and, accordingly, a reduction in gasoline production. Otherwise, exporters will try to circumvent the ban by manipulating customs codes for the export of gasoline, he said, so the implementation of this idea will be fraught with difficulties. But plans to restrict exports only confirm the fact that the damper has ceased to stimulate refineries to supply fuel to the domestic market in the face of high export netbacks, and the authorities do not know how to encourage oil companies to ship more fuel to the domestic market. Limiting export netbacks and actual export volumes could be done with the help of protective export duties, he believes, and the fact that officials do not say anything about protective duties may indicate that they do not seriously intend to restrict exports yet.

Another interlocutor of Kommersant notes that for real quotas, it will take time to prepare and adopt the appropriate regulatory framework, as well as securing responsibility for non-compliance with quotas.

According to Sergei Kondratiev from the Institute of Energy and Finance, along with raising the sales standards at the St. Petersburg International Commodity Exchange, the government could use customs and tariff regulation measures, for example, raising the export duty on gasoline. He notes that the increase in duties worsens the economics of sales, but still not as negative for the market as quotas. The introduction of quotas could face many challenges, he adds, starting with how quotas will be allocated and how often they will be reviewed.

Dmitry Kozlov