Oil workers will be frozen

The government is again unhappy with rising fuel prices

Today the Russian government will once again try to deal with rising gasoline prices. As Prime Minister Mikhail Fradkov said yesterday at a meeting of the president with members of the cabinet of ministers, he is going to meet with the heads of the largest oil companies and ministers of the economic bloc in order to “analyze the situation on the petroleum products market.” According to him, we will talk about rising fuel prices, uninterrupted supplies of gasoline and diesel fuel during harvesting operations and world oil prices. Experts are confident that, like last year, such meetings could result in a freeze in retail gasoline prices.

Vladimir Putin began talking about gasoline prices after the report of the Minister of Agriculture Alexei Gordeev. “We see that during the year, unfortunately, there was an increase in prices for low-octane gasoline, an increase of approximately 20%, for diesel fuel an increase of about 10% above the inflation rate,” said Mr. Gordeev. -- We have prepared appropriate calculations for the Ministry of Finance, as we said, based on the rate of difference in prices for agricultural products and fuels and lubricants, in order to still take into account this need and compensate for the additional costs of agricultural organizations in 2007. Now we see that the rise in prices for fuel and lubricants, which was in August and early September, has stopped, and prices are still stable. Let’s hope that by January 1 they will be generally stable and will not go beyond the inflation rate.” And Mikhail Fradkov said: “I plan to meet with the heads of leading oil companies and ministries of the economic bloc to analyze the situation on the petroleum products market and look at this issue in the general plan of the government’s efforts to combat inflation. These include specific issues regarding the provision of gasoline and diesel fuel during harvesting operations, and the problem that we are discussing in connection with inflation and exchange rate policy. Gasoline and everything related to the consequences of rising prices and world oil prices must be under the constant control of the government. We try to pay attention to this." Vladimir Putin reacted to this like this: “Okay. Thank you".

The situation on the Russian fuel market is now quite difficult. Over the past month, gasoline prices increased by an average of 9%, and in the first weeks of September - by another 2%. According to the Moscow Fuel Association (MTA), over the past week the price of AI-95 gasoline at Moscow gas stations averaged 20.37 rubles. per liter, AI-92 - 19.37 rubles. The increase in retail prices has already caused a wave of criticism against the government. In early August, the president of the Union of Oil and Gas Industrialists, Yuri Shafranik, promised the country a crisis if the price of fuel exceeded 21 rubles. per liter And last Friday, State Duma deputies from the Rodina faction sent a request to the government about measures to prevent the rise in gasoline prices and to control the quality of fuel.

According to MTA executive director Grigory Sergienko, the only measure the government can resort to is to freeze retail prices for gasoline and diesel fuel. “When the market is heavily monopolized, the government can make only one decision - to freeze prices, and retail prices, since that is what is visible. This is the tip of the iceberg, visible to the public,” he noted. Wholesale prices, in his opinion, will continue to rise. According to Mr. Sergienko, with high export duties, oil companies “try to hedge” against falling oil prices and transfer risks to domestic wholesale prices. “On the domestic market, oil companies receive income not from retail gas station networks, but from the wholesale sale of fuel, so they will not freeze wholesale,” he noted.

The current situation is reminiscent of what it was in 2004, when gasoline prices increased by almost 34%. Then, to prevent further growth, the government turned to companies, in particular LUKOIL, with a request to “influence” the retail market. Which is what was done. LUKOIL, having frozen retail prices at its gas stations, increased wholesale prices for fuel. As a result, by the beginning of spring 2005 and field work, gasoline prices almost doubled.

The oil industry does not want to predict how today's meeting between the Prime Minister and the heads of companies will end. But, as experts note, the Russian government has no real levers for regulating fuel prices other than freezing.

Anna GORSHKOVA