The decline in wholesale gasoline prices had practically zero effect on the prices at the pump

29 january 2019 | Rossiyskaya Gazeta

In December the wholesale price of gasoline fell by more than 15%, however not all of this substantial decline in the supplier prices got passed on to the end consumers. This happened because of the expected increase in the excise and the VAT rate which the companies began to partially compensate for this January, Oleg Kolobov, Lead Advisor for the Department for Fuel and Energy Sector of the Analytical Center told the Rossiyskaya Gazeta.

Oleg Kolobov
Oleg Kolobov
Department for Fuel and Energy Sector

According to the expert, the wholesale gasoline prices fell so sharply after the vertically integrated oil companies met the conditions of their agreement with the Government about the freezing of fuel prices and also as a result of the decline in the global oil prices which made exporting fuel a less attractive option for Russian oil companies. As a result, the wholesale prices of gasoline, which traditionally serve as the main market indicator and include the prices charged by fuel producers, went back to the level of March 2018.

However, the correction of the wholesale gasoline prices in December translated into a decline in the retail prices of just 7 kopecks compared with November. "The limited effect of the decline in the wholesale prices on retail prices in December was due to the expected increase in the excise rate (by 3.05 rubles per liter) and the VAT rate (from 18 to 20%) which companies began to partially compensate for this January," Mr Kolobov explained. "The wholesale and retail prices for AI-92 gasoline increased by 1.53 rubles per liter and 33 kopecks per liter respectively in the period between December 24 through January 21."

The Government is going to try and keep the situation with the fuel prices under control "using every method it has access to", the Rossiyskaya Gazeta writes, in order to ensure that the total increase in the gasoline price at the pump does not exceed 1.7% and that it does not exceed the forecast inflation rate after that.

Source: Rossiyskaya Gazeta