Petrol shortage boosts prices at the pump

Petrol prices are set to rise in Russia as oil companies increase exports, creating a shortage on the domestic market.

A shortage of fuel on the domestic market could result in a 20% rise in petrol prices. That is why Russian companies are trying to boost overseas sales before a rise in export duty in December.

As oil price rises towards $US 100 a barrel it is driving Russian producers to export as much as possible.

They are also trying to beat an increase in export duties that comes into effect in December, leaving the domestic market short of crude.

“In October, there was a deficit of petrol fuel on the domestic market. It was partly due to the maintenance period at some of the refineries but mainly because of rising exports. These factors pushed up petrol prices across the country,” explained Lyudmila Lourye, analyst of Kortes Group, Moscow.

During the last week, the wholesale price of high-octane petrol increased by $US 100 per ton. The government has an agreement with major oil producers to limit prices at the pump.

But that only makes life tougher for independent players who have to buy oil and cannot pass on the full cost.

“Even if wholesale prices are growing, companies like Rosneft are able to hold retail prices on the domestic market and get their profit by exporting, for example. But to withstand competition, independent retailers are forced to keep prices unchanged buying more expensive petrol on the wholesale market,” informed Grigory Sergienko. Chief executive from Petrol Union, Moscow.

Market watchers say there will be further shortages as long as the government encourages oil companies to export and global prices continue to rise.

It could even lead to the disappearance of the smaller petrol retailers.

The Russian Petrol Union is urging the government to decide whether it  will regulate petrol prices or leave it to the market.