According to the latest data from Rosstat, fuel prices have, on average, decreased in most regions of the country (47 out of 89). However, this decline has not been uniform, with petrol continuing to increase in price in 27 subjects of the Russian Federation. Additionally, a high base effect has influenced these statistics—prices fell significantly in areas where fuel was previously very expensive, affecting the overall result.
Over the week from 28 July to 3 August, the average price of fuel at Russian petrol stations decreased by 1.1% (more than one rouble). Specifically, in Crimea, prices fell by almost 15% (down by 32.8 roubles), and in the Vologda region, by 12.2% (down by 11.11 roubles). However, in Moscow and St. Petersburg, prices slightly rose by 0.2% (up by 12 kopecks), while in the Tomsk region, petrol prices increased by 5.2% (up by 3.5 roubles).The peak demand for petrol due to the holiday season falls during July and August. Generally, these two months see the largest annual price hikes at petrol stations. This year, due to unscheduled maintenance at oil refineries following drone attacks, the summer petrol price increase has been unprecedented, accompanied by local supply disruptions and queues at petrol stations. Therefore, the mere fact that fuel prices are currently decreasing indicates that a turning point has been reached. Going forward, retail fuel prices will continue to depend on the stability of domestic refineries’ operations. If domestic production can be ramped up, prices may continue to decline. Moreover, the saturation of the domestic market is supported by fuel imports from other countries and the relaxation of environmental regulations on the fuel produced, allowing for increased production volumes. However, there are nuances to consider. Imported petrol is more expensive than Russian petrol. To mitigate this price difference, a price damping mechanism has now been applied to its suppliers in Russia. Importers are entitled to receive part of the difference between the external market price of petrol and its indicative price in Russia (set by the state), which helps to curb wholesale price increases. Yet, this imposes an additional burden on the country's budget, which is already expected to be deficit-ridden. Furthermore, high oil prices have always been advantageous for the Russian treasury, but with fuel imports, the high cost of imported petroleum products starts to work against us. The funds to pay these importers do not come from nowhere; cuts to other expenditures will have to be made. It is not yet possible to assess how much payments through the damping mechanism have increased, as tax payments for July will be made in August and published by the Ministry of Finance only at the beginning of September.
As noted in an interview with "RG" by Dmitry Gusev, Deputy Chair of the Supervisory Board of the "Reliable Partner" Association and member of the Expert Council for the "Petrol Stations of Russia" competition, the main task now is to ensure fuel availability. Oil companies are making every effort to supply the market. However, estimating the volume of fuel imports into Russia is challenging, as official statistics are not available, but it is unlikely that they exceed 10% of total consumption (this summer, between 4-4.5 million tons per month), the expert emphasises.
The main exporter of petrol and diesel fuel to Russia will remain Belarus.According to Sergey Frolov, Managing Partner at NEFT Research, Russia is currently receiving its main shipments of petroleum products from Belarus. Reuters reported an increase in supplies from the republic via rail (RZD) between January and July, amounting to 665,000 tons of petrol and 418,000 tons of diesel fuel. Additionally, Russia has reportedly received several maritime shipments of fuel from India and Morocco. Thus, the total volumes over seven months account for less than a quarter of monthly petrol and diesel consumption in Russia. This level of import does not affect wholesale petrol prices but may impact retail prices at independent petrol stations (those not owned by large oil companies), which are compelled to purchase imported volumes due to a lack of available domestic stocks. As the price of Belarusian fuel is significantly higher than Russian market indicators, private networks are forced to sell petrol at much higher prices to cover their costs compared to major oil companies’ stations.
In this context, Belarus will apparently remain our primary supplier. As Sergey Tereshkin, General Director of Open Oil Market, points out, establishing maritime fuel import requires infrastructure to save time and reduce costs. Therefore, Belarus, capable of producing over 3 million tons and exporting about 2 million tons of petrol annually by rail, will continue to be the main source of fuel imports for the time being.
The expert also believes that retail prices will significantly depend on the stability of Russian refineries’ operations and the dynamics of unscheduled repairs at these facilities.
Regarding the reduction of environmental standards, Tereshkin suggests that the transition to Euro-2 fuel production depends on the situation at specific refineries, specifically the operational capability of the installations used in the production of high-octane fuel with low sulfur and aromatic compounds. This concerns catalytic cracking installations that split vacuum gas oil into lighter petrol and diesel components; hydrocracking installations that cleanse oil fractions from sulfur compounds and nitrogen using hydrogen on catalysts; as well as isomerization units that increase the octane number of petrol fractions without adding harmful substances. The availability of production capacities will play a decisive role.
Frolov believes that large refineries owned by major oil companies will continue to produce Euro-5 and higher petroleum products. Petrol of Euro-4, 3, and 2 environmental classes will be produced by smaller refineries, which were previously unable to supply the domestic market due to low processing depth (as per technical regulations). Currently, most volumes with lower environmental standards will be supplied to sectors where equipment has low quality requirements, such as agriculture. Low-grade petroleum products are unlikely to claim a significant role in the Russian market. In any case, petrol stations are required to disclose information about the parameters of the fuel sold, the expert clarifies.
Source: RG.RU
