‘Gasoline price will exceed psychologically important 40 rubles in 2017’
Experts of Realnoe Vremya estimated the coming increase of gasoline and diesel fuel excise duties
Less than a month left before the enactment of the law on increase of gasoline and diesel fuel excise duties, which was rapidly was approved by deputies in the first reading. Realnoe Vremya talked to experts and found out the differences between their forecasts for the price growth for fuel in 2016 and the Ministry of Finance of Russia, and when gasoline price would exceed psychologically crucial mark at 40 rubles, and what ways could add funds to the state budget.
Second rise in excises in three months
The law on increase of gasoline and diesel fuel excise duties from 1 April was signed by Vladimir Putin in February 2016. We should note that it has become the second rise in excises in a year. Euro-5 gasoline duty increased by 36,1% or, more precisely, by 2 rubles from 1 January to 7,53 rubles per litre, and by 20,3% to 4,15 rubles per litre for diesel fuel. The last time a similar situation was in 2013, when the excises were raised in January and July.
According to the amendment approved in Tax Code, Euro-5 gasoline excise will increase from 7,530 rubles to 10,130 rubles per a tonne, and diesel fuel excise will ramp up from 4,159 to 5,293 rubles per a tonne. Meanwhile, gasoline excise that doesn't correspond to Euro-5 and straight-run gasoline will grow from 10,500 o 13,100 rubles per a tonne. So, there will be a growth from 25 to 35%. The decision made will inevitably lead to price growth. However, experts of the Ministry of Finance of Russia suppose that retail gasoline prices might increase by 6-7% as a result of the increase of duties.
Gasoline retailers stubbornly keep silence, while market experts, to put it mildly, don't agree with the forecasts of the ministry.
Was the Ministry of Finance of Russia 'too modest' in its forecasts for gasoline prices?
According to Thomson Reuters KORTES, average retail gasoline price of 92/93 RON in February 2016 in Russia was 33,95 rubles/litre, and the price increased by 4,6% compared to January 2015. For instance, average spot price of 92/93 RON in Russia made up 34,636 rubles/tonne and growth was 8,3% for the same period. In addition, expressed in U.S. dollars, retail prices in February 2016 reduced by 12,2% compared with January 2015. As the experts of Thomson Reuters KORTES estimate, the expected inflation for the period considered will be 14,97%. So, the growth of retail prices will be lower than inflation by 10,4%.
In turn, Energocapital Investment Company, which is working on portfolio on petrochemistry and fuel and gasoline futures, also presented its forecast for price growth for gasoline in 2016. According to the estimation of the specialists of the investment company, the Ministry of Russia was a bit 'modest' when it said 6,5-7%.
'As for the influence of the excise on gasoline price, it should be noted that while the estimation of the increase of gasoline price of the always conservative Ministry of Finance is fluctuating around 6,5-7%, according to our analysis, we will see at least a 11% growth by the end of the year. In 2017, gasoline price will exceed psychologically important 40 rubles,' Yegor Goncharuk shared. 'In EU, where environmental standards are higher than in Russia, where there are not big privileges for the sector, gasoline price reduced by 25% in the last two years, while here an inverse dynamics is observed in the last two years.
'The share of taxes in gasoline price increased from 33 to 37-39%'
The specialists of Thomson Reuters KORTES suppose that the state regulation of prices for oil products is acceptable if it presupposes a creation of transparent 'rules of the game' aimed at reduction of seasonal volatility. However, in case of the increase of tax load on the sector, which is extreme, according to representatives of the Federal Antimonopoly Service, the answer to the state price regulation is definitely 'no'.
'For instance, if we clear the spot prices from VAT and the excise, prices reduced by 1,7% from January 2015 tp February 2016. So, the share of taxes in the spot price of a tonne of gasoline increased from 33% in January 2015 to 37039% in January-February 2016. The latest initiatives on fuel excise increase, undoubtedly, have an impact on all participants in the market: petroleum processing factories, retail sectors, consumers. The scale of the impact will be defined by the policy of the regulators,' Thomson Reuters KORTES comments.
As experts estimate, gasoline price will hinge on the price dynamics of petroleum and petroleum products on foreign markets, dynamics of ruble's rate to the dollar in a long-term perspective. Growth of gasoline production and fiscal regulation of the sector (export duties, excises, Mineral Extraction Tax, etc.) will also play a major role.
'Increase of the excise is dictated not by requirements of the market and/or its regulation but the absence of money in the budget'
We should remind that earlier in a talk to representatives of the mass media, sources in the Ministry of Finance of Russia explained the necessity of adoption of this law because the increase of the excise duties was able to increase payments to the budget, which is suffering because of the deficit caused by low oil prices. Realnoe Vremya enquired experts about the efficiency of this decision.
The President of the Association of Enterprises of Oil Product Supply of Tatarstan Irek Suleymanov notes that making amendments to Tax Code of Russia really can 'patch' the budget, but its general value of the law adopted is exceptionally negative.
'The situation in the country is unclear. No one would adopt such laws. There are problems in the country, unfortunately, there is a lack of money in the budget, it should be added somehow. And excises are payments to the budget,' Suleymanov commented. 'It is clear that it will be our burden. I number myself among gasoline consumers regardless of the fact whether I have a petrol station or not. Petrol stations exist like any shop and any factory. It is very sad, very sad. The value is only negative.'
In turn, the analyst of Investment Modelling Department of Energocapital Investment Company Yegor Goncharuk informs that the government is 'patching' the budget using wrong methods and instruments.
'The increase of the excise is dictated not by requirements of the market and/or its regulation but the absence of money in the budget, which is 'successfully' spent on development of the economy of Russia by construction of the most expensive stadiums, transportation of construction material for the Olympic Games by helicopters and forgiveness of debts and/or crediting a half of the world from Ukraine to African and Latin American countries,' Goncharuk told.
According to the speaker, a similar situation is arising in almost all sectors and domains of the state.
Platon for truckers, payment for complete overhaul for natural persons, shares for all car owners, a big increase of tariffs on electricity and capacity for juridical persons are the answer to the question of 'Who is guilty in a three-year recession?'. We should choose necessary instruments to form an additional income (for instance, tax on luxury) or change the taxation vector (for example, to offer additional privileges for companies with high investment activity),' the analyst of Investment Modelling Department of Energocapital Investment Company concluded.
Anticipatory rise in gasoline price
It should be noted that the growth of gasoline price in Volga Federal District was mentioned before the enactment of the amendments. But this growth might be called symbolic. According to the data of the analytical staff of Realnoe Vremya, gasoline prices have increased within one March week. So, the retail price for 92 RON from 9 to 14 March increased by 10 kopeks on average to 32,93 rubles/litre. 95 RON gasoline has risen by 3 kopeks to 36,2 rubles/litre.
The official statistics also notes the data on rise in gasoline price at least for 92 RON. According to Tatarstanstat, an average price from 9 to 14 March increased by 25 kopeks to 32,80 rubles.