Oil price drop in the world market will not make life easier for Russian drivers

The decline in oil prices in the world market will not lead to a decrease in the cost of gasoline in the Russian Federation. According to RBC, the reason for this is the regulation of the fuel market of Russia.

Russian gas prices
Russian gas prices

In Europe, gas prices are tied to oil prices, and after they fell by 30% on the night of March 9, a ton of premium gasoline in the EU countries fell by more than $100.

Russian wholesale prices did not show any significant reduction. And as Mikhail Turukalov, general director of Product Market Analysts, notes, one should not expect a drop in gas prices on the domestic market due to some of its features.

The fact is that after freezing fuel prices in 2018, the Russian government launched a mechanism to stabilize companies’ revenues and retail fuel prices at gas stations. This is the so-called damper – the amount of 65 – 68% of the profits that oil workers get from selling fuel in the domestic market or abroad. If the export of petroleum products generates more revenue than domestic trade, the state pays damper to companies in compensation for restraining domestic prices. When people in the oil industry earn more on the domestic market than on the export, they must transfer the damper to the budget.

Under these circumstances, the profit for oil industry for trade on the domestic market will be significantly higher than for the export. However, according to analysts, domestic prices will not be lowered, as part of the revenue will have to be shared with the state. This, especially in the situation of falling export profits, can hit the wallets of company owners. And it turns out that due to the characteristics of the damper, retail fuel prices in the Russian Federation do not depend on world oil prices and, in fact, can only grow.

A similar situation happened in 2014, when a collapse in oil prices on the world market by a third led to a rise in gas and diesel prices in Russia by 8 – 11%. In subsequent years, no matter how the external situation in the oil market changed, we received reports of a gradual increase in retail fuel prices with enviable constancy.

It turns out that the entire balance of the Russian market system functions solely for the preservation of the living conditions of a narrow group of people who seized the natural resources and means of production in the country in the 90s. The market does not take into account the interests of other members of society.

Therefore, in the current difficult situation, one should not expect any development in a new direction. Corporation owners will strive in every way to mitigate the impact of the crisis on their profits. And the easiest way to get compensation for forced losses is to get into the pocket of workers. Capitalists have repeatedly done this trick before, it is unlikely to stop this time.

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