Why in Russia the price of gasoline will rise sharply from 1 January 2019

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Russian oil and gas companies continue to sign agreements with the FAS and the government of the Russian Federation on measures to curb prices and support the domestic market of petroleum products. Previously, such documents have agreed to “Rosneft”, “Gazprom Neft”, “LUKOIL”, “RussNeft”, “Neftegazkholding” and others. Before the agreement was signed and “Tatneft”. As stated in the message companies, governmental structures support the initiative and are interested in further development of the fuel market. Dmitry Kozak, Deputy Prime Minister, has reported to President Vladimir Putin on the stabilization of prices for gasoline and ensured that the cost of fuel before the end of March 2019 will not change.
Recall the General framework agreement. Oil companies have pledged to keep fuel prices at its filling stations to completion March next year, to bring wholesale prices to the levels of July 2018 and each calendar month to increase the production and sale of refined petroleum products by 3% to corresponding period in 2017. FAS curbing rates no one will be punished – it is also written in the documents. In the agreement, there is a marginal cost for fuel for each of the Russian regions.
There are a lot of application, which reflects the average price on the wholesale sale of petroleum products to the Federation. There is guidance to the end of the year. So, agreed that a ton of tradable fuel – AI-92 – should not cost more than 53501 rubles a ton of diesel is not more expensive 51201 RUB Is significantly below those price levels were observed in late October – early November.
With all this, oil companies will raise fuel prices from 1 January 2019, simultaneously with the VAT rise in the country. Agreed that the price growth will not exceed 1.7 percent. And then what? More likely, new growth of prices for gasoline and diesel will be in April-may and lasts till autumn. Oil, one way or another, you will find the option to shift the financial burden on the shoulders of the consumer, albeit with a delay in time.
The consumer in time, in November and December – will be the relative winner purely due to the rigid fixation of prices. However, it is understood that this is only a temporary measure, and long-term effect it will not. The average annual growth of prices on fuel in Russia is 8-10%, 2/3 of the price of a litre is the excise taxes and fees. While this ratio does not change, the market will have to adjust the “hand” mechanisms.
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Anna Bodrova,
Senior analyst,
Alpari