Gazprom Neft chief warns fuel prices must rise to avoid shortages
MOSCOW. April 21 (Interfax) - Domestic prices for oil products in Russia must rise to avoid shortages, Gazprom Neft chief Alexander Dyukov told Rossiya 24 television.
"The current prices need adjustment. Holding prices at the current level while prices abroad are rising will lead to falling yields and rising losses at the oil companies. But oil company earnings are not the main issue. A price adjustment is vital in order to avoid shortages on the domestic fuel market," Dyukov said.
The process of diverting oil products from the domestic market has already begun, he said. "The export netback on oil products is higher than domestic prices. That gives traders [in neighboring countries] an incentive to buy product on the exchange, from our refineries. As a result, we are beginning to supply profits to other countries, and that's not right. It will inevitably lead to shortages on the domestic market," Dyukov said.
Current prices for fuel in Russia are not high, he said. "I don't think gasoline prices in Russia are very high," he said. "They are lower than in Europe, where gasoline, diesel prices are 40%-50% higher than in Russia. Take the U.S., which is an oil producer, but with less burdensome tax policy toward the oil companies. Taxes account for just 11% of the cost of gasoline in the U.S. compared with 60% in Russia. But even so, the price of gasoline is lower than in the U.S.," Dyukov said.
Russia's integration with the global market means prices on the Russian market will inevitable be correlated with those on the world market. "However, there are measures that can be taken, such as reducing excise taxes," he said.
Commenting on relations between the oil companies and the Federal Antimonopoly Service (FAS), Dyukov said: "The sides are having a dialog. From time to time we and the FAS have different views as to the situation on the domestic oil product market."
"Yes, it leads to investigations, cases being opened against the oil companies and, as a result, conflicts. But I don't consider a conflict to be bad. It illuminates the problem zone so that a solution can be found," he said.
The Russian oil products market performs its main function well enough, although certain "areas of inefficiency" persist, Dyukov said. "Problems arise periodically, for example, this winter, with the price of diesel fuel and aviation kerosene. The increase was the result of absolutely objective causes: higher demand. The oil companies tried to overcome the situation. We continue to work with the FAS and the Energy Ministry. In particular, measures are being drawn up that I hope will help to resolve these problems," he said.
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