Russia » Economics

What makes gas prices go up?

Some experts claim that federal politics aimed at acquiring as much profit as possible from exporting raw oil is to blame for high oil prices in Russia.

This is practically the only source of income for our economy; there is a chance to find common grounds with the so-called free world market – major consumer of hydrocarbon raw material, Western companies and China. They load their industry while we get an opportunity to save some cash.

As a result, our oil-refining plants experience deficit of raw materials, industry’s modernization develops at an incredibly slow pace, none of the existing equipment is used to full extent, expenses needed for production of a single liter of oil is rapidly increasing. That is why the increase of export tariffs on oil products will encourage the increase of oil and diesel prices perhaps as early as this fall.

According to Russian authorities, such situation on the market can be changed only by means of liquidating all of the existing monopolies. There are talks on the federal level that today’s oil prices resemble some sort of a cartel deal. However, whereas there exists some competition on the all-Russian level, it is absolutely non-existent on the regional level.

Judging by a number of reports from officials of the anti-monopoly committee, Pskov region managed to escape monopolization of its fuel market. Head of the committee Alexander Soloviev and his assistant Ludmila Samokhvalova state that the main members of the regional market “act properly”. They also claim they have “free oil prices.” Such major difference of oil prices between the regions can be explained in a variety of ways: this could be either due to distant locations of suppliers or relatively insignificant fuel consumption.

At the same time, no one can provide a clear explanation as to why oil prices on the border of the Baltic countries are significantly lower than those in Pskov and St. Petersburg. Take Russian-Estonian check point “Shumilko” for instance. There A-95 fuel costs 12 rubles and 80 kopecks; in about 70 kilometers from that place, in the Russian town of Pskov, it costs 14.80. Management of the “PskovNefteProdukt” company refused to comment the issue. According to a general manager of “Aris-Pskov” Vladimir Shklyarenko, “there is a fierce on the border, whereas in Pskov there is none. Despite the fact that the prices there are low, we receive our portion nonetheless and that is absolutely fine by us.”

Everything seems to be quite alright at the first sight: competition prospers, companies attempt to increase their clientele by means of  reducing prices. Then how come these same things do not take place in Pskov, Ostrov or Don? How come this does not take place in Pskov, Ostrov or Don? How come no one is attempting to increase their clientele there? Why do all gas stations increase their prices practically simultaneously all through the region? It is doubtful that we will get an official answer any time soon.