The government has changed the damper formula Business RusLetter

The government approved a bill to adjust the damping mechanism, which stabilizes the cost of motor fuel in the country, from April 1. This was announced to journalists on February 11 by State Secretary – Deputy Minister of Finance Alexei Sazanov.

The bill was prepared by the Ministry of Finance jointly with the Ministry of Energy. According to Sazanov, additional budget expenditures for payments to oil companies in 2022-2024. will amount to 650.7 billion rubles. (with an oil price of $80 per barrel and a dollar exchange rate of 74 rubles). Sazanov recalled that half of them could be compensated for by the increase in the mineral extraction tax (MET) for oil workers that had already taken place. The remaining 50% is planned to be covered by the amount that should have gone to the National Wealth Fund (additional budget revenues from oil sales are sent to the reserves), but will not go there due to the adopted damper adjustments.

The damper mechanism began to operate in 2019, it was decided to use it after a sharp jump in prices for gasoline and diesel at filling stations in 2018. The bottom line is this: when motor fuel is more expensive abroad than in the domestic market, the state compensates the refinery for the difference, to motivate more fuel to sell in Russia. But when foreign prices turn out to be lower than domestic Russian ones, the oil industry already pays extra to the budget (for 2020, according to the Ministry of Finance, thanks to the damper, the budget was replenished by 400 billion rubles). At the same time, the formula of the damper mechanism for calculating payments does not take into account real prices at gas stations, but the so-called indicative wholesale price of fuel in the Russian Federation, which is annually indexed to inflation.

The current adjustment of the damper was adopted in order to keep motor fuel prices in Russia within inflation limits in 2022. “In the current macroeconomic conditions, due to the ratio of the ruble exchange rate and rising oil prices, exports for oil companies are more attractive, which put pressure on prices in the Russian market,” Sazanov explained.

The bill, approved by the government, provides for an increase in compensation to oil companies for the difference between the export and indicative domestic fuel price – from 68% to 83% for gasoline and from 65% to 83% for diesel. According to the authors of the draft law, this will be enough to form an optimal ratio between export parity prices, which oil companies are guided by, and prices in the wholesale segment in Russia. This will create incentives for the reorientation of supplies to the domestic market.

The bill also provides for a reduction from 20% to 15% of the allowable level of excess of the average wholesale selling price of diesel fuel over its indicative price. If the price is above this level, the damping allowance is reset to zero.

Earlier, the Ministry of Finance expected to adjust the damper from July 1 (Sazanov spoke about this in January 2022). Deputy Prime Minister Alexander Novak reported on December 29 that the government had developed proposals for adjusting the damping mechanism. At the same time, he noted that the indicative price in the damper formula in 2022 can be indexed by 3% (in 2021, after the spring adjustment, it was 52,300 rubles/t for gasoline and 52,250 rubles/t for diesel fuel). At the same time, at the end of 2021, the FAS proposed fixing the current damper parameters for 2022, including the indicative price for gasoline and diesel. The current indicative fuel price for 2022 specified in the Tax Code is RUB 55,200/t for gasoline and RUB 52,250/t for diesel fuel.

The press service of the Ministry of Finance told Vedomosti that the indexation of the indicative price for gasoline and diesel fuel “is not the subject of this bill.” The press service of the government of the Russian Federation did not respond to a request.

Previously, oilmen complained that the damper does not reflect the real situation on the market. Last year, the government already adjusted the damper formula from May 1st.

According to Rosstat, as of February 4, the average retail price for gasoline in Russia since the beginning of 2022 has increased by 0.9%, for diesel fuel – by 1.8%. At the same time, since the beginning of January, wholesale prices for gasoline have increased by 4.5-4.7%, for diesel fuel – by 11%, according to the data of the SPIMEX exchange. In 2021, retail gasoline prices in Russia increased by an average of 8.8%, with inflation of 8.39%. At the same time, in 2020 they grew at a rate significantly lagging behind inflation: by 2.5% with inflation of 4.9%.

The need to adjust the parameters of the damper mechanism arose due to a sharp increase in oil prices (Brent oil has grown by 18% since the beginning of the year to $ 92.9 per barrel on February 11. – Vedomosti) and a weak ruble, says the group’s senior director for natural Fitch Ratings resources Dmitry Marinchenko.

In April, the season of planned repairs at Russian refineries begins, which usually negatively affects fuel production, adds Anna Lishnevetskaya, project manager of the Petromarket research group. At the same time, the demand for gasoline and diesel fuel is growing from independent operators of the small wholesale and retail market to accumulate stocks in anticipation of a seasonal increase in fuel demand from car owners, she points out.

“Growing demand in the wholesale market against the backdrop of a decrease in product output creates risks of increasing producer prices and reducing the marginality of fuel retail trade in the context of limiting the growth of their prices at gas stations by inflation,” Lishnevetskaya notes. Increasing damper payouts, she says, could mitigate those risks.

Marinchenko draws attention to the fact that in this case there will also be an adjustment of the MET, that is, in fact, a partial redistribution of profits between oil production and refining. The state is trying, on the one hand, to avoid the risk of rising fuel prices at gas stations above inflation (at the same time, inflation this year will obviously not be low), and on the other hand, not to infringe on the interests of oil companies, the expert says.

Vedomosti sent inquiries to the largest oil companies in Russia.

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