Russia Increases Export Duties to Keep Gasoline at Home

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May 3 – The Russian government has increased the gasoline export duty by around 44 percent starting from May to curb exports and fight a fuel shortage at home as companies preferred to sell gasoline overseas due to capped domestic prices.

The tariff, tied to international prices for gasoline, will stand at US$408.3 per ton instead of the previously planned US$304 per ton, the government said on Friday. The decision had been made after two dozen Russian regions reported gasoline shortages.

Fuel shortages began over the weekend, when most filling stations ceased trading because of a lack of fuel in the Altai, a Siberian region to the north of Kazakhstan.

The deficit later spread further across the country, even all the way to Murmansk Oblast, where filling stations started selling limited amounts of gasoline.

At Rosneft’s stations in Murmansk, only special brand cardholders are allowed to buy gasoline, Steer.ru says. The companies are limiting sales to 20 liters per driver in Novosibirsk and other Siberian regions, while St. Petersburg has only gasoline left for 14 days, vzglyad.ru reported last Friday.

Several governors in Russia’s Far North and Far East regions reported 30 percent increases in petrol prices and a general shortage of supplies.

The export duty for light oil products was 67 percent of the crude oil export fee. A heavy fuel, on which the export level is 47 percent of that applying to crude, is not affected.

Analysts said oil companies had switched fuel flows abroad where prices are rising while in Russia the government keeps a tight lid on fuel prices ahead of parliamentary elections in December 2011 and the presidential poll in March 2012.

The Federal Antimonopoly Service says it suspects a cartel agreement between large oil firms, while the Prosecutor’s Office launched several cases against producers, RIA Novosti reports.

According to Vedomosti, Deputy Energy Minister Sergei Kudryashov said on all oil companies will suspend exports of gasoline in May in order to supply the domestic market.

“It is a temporary measure and only concerns gasoline. There is no firm duration, but it may stay in force until August 2011,” a government source close to the matter told the Reuters.

“This is a knee-jerk reaction to a short-sighted policy. If you prevent companies from acting as a profitable business, this is what you are going to get,” said Artem Konchin, oil analyst at UniCredit in Moscow.

“This is entirely the government’s fault, because it couldn’t think of anything better at the beginning of the year than to force companies to put price caps at the pump,” said Alexei Kokin, an oil analyst at Uralsib.

“In any case, the state has no one but itself to blame for the fiasco – it coupled a doubling of the excise tax in January with arbitrary demand for gasoline price cuts in February, and then was shocked, shocked to learn that shortages have sprouted,” Troika Dialog analyst said to the RIA Novosti.

Over 90 percent of premium gasoline produced in Russia is consumed domestically, so lower exports alone would not help cover rising demand of high-octane Euro-3 and Euro-4 gasoline.

A lack of tax incentives to encourage investments in refinery upgrades to produce higher-quality fuel is largely to blame, industry officials say. Spring maintenance shutdowns to switch over to summer blends have added to supply tightness.

“As the car fleet improves, the low-octane fuels are no longer required. The high-octane fuels come into demand and that’s what’s short,” Jonathan Muir, chief financial officer of TNK-BP, told Reuters.

Russia produced 10.24 million barrels per day (bpd) of oil in April, up 0.5 percent from 10.19 million bpd in March and short of a post-Soviet record of 10.26 million hit in last October, Energy Ministry data showed on Monday.

The data also showed that Russia exported around 5.59 million bpd of crude oil in April.

Russia, which is outside the Organization of the Petroleum Exporting Countries (OPEC), has remained the sole country to produce more than 10 million bpd of oil as firmer prices for Brent crude LCOc1, which last month reached a 32 month-high high above US$127 per barrel, stimulated output.

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