Translated material
Gasoline won't be expensive
Gas Lobby Reassures Government
The approaching autumn will not cause an increase in gasoline prices, experts and participants in the Russian retail fuel market assure. Executive Director of the Russian Fuel Union Grigory Sergienko recently spoke about the upcoming stabilization of fuel prices, and last Friday the President of the Union of Oil and Gas Industrialists of Russia Gennady Shmal expressed a similar opinion. According to them, the domestic market is now quite attractive for the supply of petroleum products, so the fuel shortage that was observed several years ago should not be expected. “Today there are no objective reasons for a surge in gasoline prices on the domestic Russian market, they will remain the same,” Mr. Shmal assured journalists. “It will not be possible to reduce prices for gasoline and diesel fuel in the near future, but it is quite possible to make them stable and not increase them.” True, in his opinion, this will largely depend “on a productive dialogue between fuel producing companies and the state.”The gasoline issue is traditionally raised by the government at the end of summer, before the start of massive agricultural work, when fuel prices begin to creep up following the increase in demand and the cost of oil. Over the past two years, officials have been able to negotiate with oil companies to maintain current prices at gas stations. This is largely explained by the fact that such decisions were quite profitable for the oil workers themselves, since they allowed them to fix prices in the fall at the peak of growth. LUKOIL supported this initiative especially actively. At the end of 2004, Vagit Alekperov personally promised Vladimir Putin to freeze gasoline prices at his own gas stations during 2005, thereby forcing other companies to take such a step. Last September, at a meeting with Prime Minister Mikhail Fradkov, officials decided to abandon such harsh measures, but demanded that oil companies “do everything in their power” so that prices for petroleum products do not rise until the end of the year.
This year the situation will most likely repeat. At the end of July, at a meeting of the commission on the fuel and energy complex, where the main discussion was about the construction of an oil pipeline from Eastern Siberia to the Pacific coast, Mikhail Fradkov already threatened oil workers to find tougher methods of combating high fuel prices. “We will consider these issues separately, the mathematics here is complex, appealing to conscience, apparently, is no longer effective, we will work using other methods,” he promised.
According to experts, this year it will also not be difficult for officials to reach an agreement with oil companies on fixing fuel prices. “This is quite possible,” Mr. Shmal is sure. - For this, of course, a meeting is needed. But, as far as I know, LUKOIL has already announced that it will not raise prices. And if Rosneft, a state-owned company, joins it, then I think that all other companies are unlikely to be interested in raising prices.” At the same time, he noted that such an agreement would have a beneficial effect on market stabilization. After all, since the oil workers and the government began to agree, “prices for AI-95 gasoline have increased by 11%, this is a small increase - less than inflation.” In response, according to Mr. Shmal, the government may reconsider some taxation issues: “In the structure of the price of gasoline in Russia, approximately 60% is due to taxes, while in the United States it is 23%. This is bad for us, because by doing so we raise the cost of gasoline. The government can lower the price of gasoline by cutting taxes.”
True, the companies themselves have divided opinions about fixing prices. While LUKOIL has repeatedly emphasized that it is ready to discuss such practices this year, Rosneft notes that it sees such an approach as a violation of competition principles. “We are a market company and act within the price environment. Our goal is to increase profits for shareholders, and price fixing is a completely non-market method,” says a company representative.
However, most likely, drastic measures will not be required in the near future. Gasoline prices have been quiet this year. According to Rosstat, from January to July the cost of the main brands of gasoline in Russia increased by only 0.5-0.7%. And in Moscow and the Moscow region there was even a slight drop, especially on AI-95. If such a trend, as Messrs. claim. Shmal and Sergienko will remain, then oil workers and the government will be able to report to the people with a clear conscience about the effectiveness of the dialogue between business and government.
The Federal Antimonopoly Service has sent inquiries to manufacturers and companies selling liquefied petroleum gas (LPG) due to rising wholesale prices. Two years ago, as a result of a similar study, the FAS found that the price was inflated by Gazprom and its controlled SIBUR, which thus illegally received more than 150 million rubles from buyers. The new inspection is related to complaints from gas retailers about increases in wholesale prices in the middle of the year, in particular in the Saratov, Nizhny Novgorod and Rostov regions. The main producer of LPG in Russia is SIBUR; gas is also sold in smaller volumes by Gazprom, LUKOIL and other oil producers. REUTERS