Russia » Economics
Author`s name Ольга Савка

Petrol prices on rise again

Oil producers increase the price to compensate their losses

Experts state that petrol prices may go up again. And this expert opinion seems to be reliable: indeed, oil prices have been stable within several months even though the world tendencies were quite opposite, but now oil prices are on the rise. The purchasing oil price for April increased by about 25 per cent; experts insist that petrol price will go up as well. In the Moscow Region, petrol price increased by 1.1-1.5 percent in general within the past week.

This increase in the petrol price is connected with the oil prices on the domestic market. Oil producers will not sell oil at the same price they did in winter.

Executive Director of the Russian Fuel Union, Grigory Sergienko, thinks the oil price increase on the domestic market is connected with the oil price increase on the world market (and the mining tax is dependant upon the world oil prices). The Vedomosti newspaper cited him as saying: “Domestic prices for oil are much lower than export prices, however the tax levied on both is the same. So, oil producers increase the price to compensate their losses.” The expert believes that differentiation of the mining tax for exported oil and for oil used on the domestic market would save the situation.

Renaissance Capital Vice-president Ronald Smith thinks “the export terms are particularly favorable today, and transportation by sea is done in corpore.” “As a result, the supply on the domestic market falls and the prices go up,” Vedomosti cited Ronald Smith. Maria Chernova with the Petromarket Investment Group thinks that navigation opening in April will open up more opportunities for export of oil and oil products and will entail increase in oil prices. The expert also explains the increase of price on the domestic market with the increase in oil export. “Really effective supplies to the foreign market stimulate export of oil and reduce the supply on the domestic market,” she said. Even the increase in the customs duties for oil export from $83 to $102.6 per ton will not improve the situation.

Why do Russians have to pay the same price for petrol that Americans or Europeans do at the time when Russia is one of the world's leaders in oil production?

The Federal Anti-monopoly Service and high-ranking officials emphasize that oil monopolists come into collusion to dictate their prices, and thus are guilty of the increase in petrol prices. In fact, the government also benefits by the increase in petrol prices, as it collects good taxes at that. However, there is no evidence that any collusion of this type may actually exist. The Federal Anti-monopoly Service states that the current petrol prices are about 20 per cent higher than reasonable petrol price may be.

Today, pricing on the oil market is getting a social and political problem indeed. During mass protests against substitution of privileges with money compensation initiated by the Russian Government, many people also protested against too high monopolistic petrol prices.

Several transport organizations even demanded that governmental control over petrol prices must be established. There were several protest actions against the increase in petrol prices in the Russian regions. Unfortunately, they were not as effective as similar actions organized in Western Europe and the US.

In 2000, car owners of several EU countries went on a strike and blocked operation of oil refineries because of a leap in petrol prices. In Great Britain, the protest action was stopped because the whole of the country was left without petrol, food and consumer goods. The sweeping protest actions made the EU authorities consider their doings better. Is this possible for Russia?