Government nixes proposition for imposing governmental control over gasoline retail prices
In a recent development, a new project has been proposed to set the duration of maximum permissible retail prices for petroleum products in Russia. However, experts and regulatory bodies have raised concerns about the project's potential impact and the underlying reasons for persistent high prices.
The project does not specify any new roles or responsibilities for market participants, as they were already involved in agreements to stabilize and develop the domestic market for petroleum products, as stated in decree No. 1329 from November 2018. The Ministry of Energy is among the involved parties in the proposed project.
The authors of the project note that the measures taken so far have not resulted in visible improvements for the final consumer, specifically regarding gasoline prices. However, the project does not provide any data or evidence to support its claims about the need for the proposed changes.
The proposed project aims to set the duration of maximum permissible retail prices for petroleum products for 3 to 5 years. The Russian Federal Antimonopoly Service (FAS) is responsible for monitoring oil companies' adherence to antimonopoly legislation, including pricing justification, but the changes proposed in the bills seem excessive according to their current control and monitoring. Notably, the project does not mention any penalties or consequences for oil companies that fail to comply with the proposed maximum permissible retail prices.
Previous measures by Russian authorities, such as repeated gasoline export bans and strict controls by the FAS and Ministry of Energy, have not yielded visible price relief for consumers primarily due to supply-side constraints and structural market problems. Key reasons include refinery disruptions and sanctions, physical shortages, export bans impact but cannot fully offset domestic demand pressures, market vulnerabilities, and limited scope of price control tools.
In summary, despite constant supervision by FAS and the Ministry of Energy, visible price stabilization for end consumers in Russia has been elusive because the fundamental issues are physical supply shortages caused by refinery damage, maintenance delays under sanctions, and structural market weaknesses. Export restrictions and regulatory controls help but cannot alone solve these deep-rooted supply problems to lower prices at retail levels effectively.
It remains to be seen whether the proposed project will bring about the desired improvements for consumers, or if further measures will be required to address the underlying issues and achieve price stability.
The proposed project, aimed at setting the duration of maximum permissible retail prices for petroleum products, is a part of the ongoing discussions in the business and finance industry, with the Ministry of Energy involved. However, concerns about the project's effectiveness in delivering visible improvements for final consumers, particularly gasoline prices, have been raised by experts, as no supporting data or evidence has been provided.
