Lukoil's Fedun: fuel shortage a result of rising demand for gasoline, shrinking margins
MOSCOW. April 27 (Interfax) - The current fuel shortages in Russia are the result of growing demand for gasoline and shrinking profit margins at the oil companies, Lukoil Vice President Leonid Fedun said.
Russian gasoline stocks are being drained not by higher exports, but by rising demand and pricing limits, Fedun told journalists.
Lukoil does not have a problem supplying fuel to its filling station, since the oil major has completed a three-year program of upgrades to its refineries and added capacity to produce 1.5 million tonnes of Euro 4 gasoline a year, he said.
"We don't have a problem, although we see that gasoline is in short supply, that stocks are diminishing, not because the gasoline is being exported, but because of the gigantic demand. Production is not covering demand. We have a lot of diesel fuel and fuel oil production, but not enough gasoline production," he said.
The rapid increase in new car sales - growth of 30%-40% a year - boosts demand for gasoline by the same amount, he said. "There isn't enough gasoline. Refineries need to undergo comprehensive upgrades. That's a pretty long process," Fedun said. The government's car scrappage program is partly responsible, he said. "It put millions of new cars on the market, and they need gasoline," he said.
The limitations on gasoline price increases is also a factor, since it distorts the market. A better solution would be to find mechanisms to stimulate gasoline production in Russia. "That will be discussed today at a meeting chaired by Deputy Prime Minister Igor Sechin," he said. Fedun supports an Federal Antimonopoly Service (FAS) proposal on cutting excise taxes when oil is priced above a certain level. "The state could lower the excise tax in order to support margins. Profit margins were above 20% last year, but they're lower than 15% now," he said.
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