Global decline in oil prices triggered increase in Russian gas prices

Letting cheap gas into the country is unprofitable — why?

The failure of the OPEC + deal caused the largest drop in oil prices in several decades, and gasoline fell in price in many countries along with them. However, the situation in Russia did not change — the 92 petrol went up by 0.09%, the 95 petrol — by 0.06%, despite the official inflation of 2.5%. Only diesel got cheaper — by 0.14%. At the same time, the government intends to limit the import of cheap gasoline from other countries from April to September. Why is the price of oil falling while gasoline price keeps rising?

Oil consumers will compensate the losses to RosNeft
Oil consumers will compensate the losses to RosNeft

Russia is one of the leading countries in oil production, and in the conditions of a sharp drop in prices in the oil business, Russians should enjoy cheap raw materials inside the country, but this is not happenning. The thing is that most suppliers of gasoline are vertically integrated oil companies: they extract oil, process it into gasoline, engage in logistics, and sell at gas stations.

As a result, imported gasoline is sold cheaper than Russian. For domestic consumers, cheap gasoline is an absolute blessing. For oil companies it is an absolute evil — they already suffer losses from exports to the outside world, where oil and gasoline are much cheaper.

In order to support large capital since 2018, Russia has been operating the so-called damper mechanism, which keeps gasoline prices going below inflation.

If fuel export prices are higher than domestic ones, then the oil industry receives compensation from the budget for lost profits from foreign supplies. But if domestic prices are higher than those operating abroad (this is just our case), then companies are obliged to send part of the profit to the budget. The total state revenue from the damper from April to December will amount to 600 billion rubles.

Thus, the damper mechanism is a mechanism for redistributing oil funds. Instead of a loss, a large business makes a substantial profit, but the rest of the business, which depends on gas prices, loses money.

And most importantly — again, ordinary drivers must pay for their crisis. Big capital decided so.