On your own: why the EU fuel embargo could lead to higher gasoline prices in Europe and lower prices in Russia

During the week, from January 30 to February 5, the average retail price of AI-92 gasoline in Russia decreased by 1 kopeck - to 47.17 rubles per liter, and AI-95 fuel rose by 4 kopecks - to 51.4 rubles per liter.

The cost of diesel fuel at the same time dropped by 1 kopeck - to 58.81 rubles per liter.

Such data on Wednesday, February 8, was published by Rosstat.

As follows from the materials of the department, since the beginning of 2023, gasoline at Russian gas stations has risen in price by an average of 0.06%.

Moreover, over the past 12 months, the cost of fuel has decreased by 0.08%, while prices for goods and services have increased by an average of 11.72% across the country, according to a report by the Ministry of Economic Development.

One of the main reasons for such a restrained price dynamics in the fuel market was an oversupply of fuel in the country.

Alexey Fedorov, an analyst at TeleTrade, spoke about this in an interview with RT.

“Western sanctions against Russia imposed in 2022 have complicated the delivery of our traditional export goods abroad, including energy resources.

While logistics was being rebuilt, a significant overhang of supply was formed on the domestic market of petroleum products, especially in terms of gasoline, ”the specialist explained.

At the same time, Western restrictions, until recently, practically did not interfere with the export of Russian diesel fuel, since, for example, European countries are critically dependent on this type of fuel, Fedorov added.

Thus, there has not been a strong overstocking of diesel in Russia, and over the past year, its retail price has increased by about 10%, which, however, turned out to be lower than inflation.

“The role of the Russian government in maintaining price stability cannot be underestimated.

The authorities have accumulated significant experience in regulating the fuel market, especially in terms of changing the damper formula and contacts between the Energy Ministry and the oil industry.

Therefore, what used to be criticized, namely a high share of manual control, turned out to be an advantage in turbulent conditions and made it possible to prevent excessive price volatility,” Alexey Fedorov explained.

The so-called damper was launched back in 2019.

As part of the initiative, the state reimburses oil companies for lost revenues when supplying fuel to the domestic market.

If fuel prices in Russia are lower than export prices, producers receive compensation from the federal budget.

With a higher cost of raw materials within the country, business, on the contrary, deducts part of its profits to the treasury.

outside pressure

In the near future, experts interviewed by RT do not expect a serious rise in the cost of fuel in the country.

At the same time, additional pressure on prices may be exerted by new Western restrictions on Moscow, experts do not exclude.

Recall that on February 5, the European Union imposed an embargo on the import of Russian oil products.

At the same time, the EU, together with the G7 states, banned its companies from insuring and transporting gasoline, diesel, kerosene and a number of other types of fuel from the Russian Federation by sea to other regions of the world if the price in the contract exceeds $45 and $100 per barrel, depending on the category of fuel.

Back in December 2022, similar restrictions were introduced for Russian crude oil sold for more than $60 per barrel.

As previously explained by the Western authorities, the establishment of the marginal cost of raw materials will limit Moscow's windfall profits from the sale of hydrocarbons and will have a positive impact on the entire global energy industry.

In response to the actions of the West, Russia imposed a ban on oil supplies to those countries that require compliance with the price ceiling when concluding agreements on February 1.

In the near future, the same measures will have to apply to the export of petroleum products.

• RIA News

• © Vitaliy Timkiv

At the moment, Russian companies are actively redirecting energy supplies to Asia, Africa, Latin America and the Middle East.

However, while the new trade routes are not yet fully formed, business may start selling more fuel inside Russia, analysts say.

“Now we will observe an increase in the supply of petroleum products to the domestic market and, most likely, we will even see a slight overstocking.

This is due to the fact that some suppliers have not yet had time to reorganize and they need time to search for new export channels.

As a result, gasoline prices in the coming months will remain at about the same levels as today, but diesel prices may temporarily become cheaper, ”Sergei Pikin, director of the Energy Development Fund, told RT.

A similar point of view is shared by Alexei Fedorov.

In his opinion, with the beginning of the spring season, the cost of gasoline in Russia will begin to rise slightly, and by the beginning of summer AI-92 and AI-95 fuel will rise in price only by 2-3% - up to 48.5 and 52.7 rubles per liter, respectively.

At the same time, the cost of a diesel engine may increase by only 0.5-1% - up to 59.2 rubles per liter, the expert suggested.

By the end of 2023, the increase in prices for motor fuel in Russia will not go beyond inflation, Sergey Pikin is sure.

Thus, from January to December, fuel prices may rise by 5-7%.

Yourself is dearer

It is noteworthy that a few days after the introduction of restrictions on Russian oil products, the European Union decided to make several exceptions to the sanctions.

In particular, the price ceiling will not apply if fuel from the Russian Federation has been substantially processed in a third country or mixed with fuel from another state.

Thus, the European Union will actually legalize gray schemes for supplying fuel to its own market, Deputy Prime Minister of the Russian Federation Alexander Novak believes.

In his opinion, the actions of the European authorities defy logic and only show that Europe still needs energy resources from Russia.

“These decisions once again underline the need to think about the future.

And in the future, if we are guided by decisions such as an embargo and the introduction of price ceilings, there may be a big imbalance ... Without Russian oil products, European consumers will not be able to cope, because we occupy a large share (on their market. -

) and without our oil products there will be a large shortages and rising prices,” TASS quoted Novak as saying.

• RIA News

• © Ivan Fedorov

As a result, Europe will continue to buy fuel of Russian origin in the foreseeable future, but will already do it through third countries.

Meanwhile, such supplies will cost the European Union much more expensive, experts say.

“Europeans will purchase oil products at market prices, but logistics have become more complex and costly, so the West will have to pay more for the transportation of raw materials.

The cost of fuel in the EU remains quite high anyway, but now they are clearly not worth waiting for a decrease in prices at gas stations, ”said Sergey Pikin.

According to Alexei Fedorov, the leadership of the European Union is gradually beginning to realize that the sanctions policy has led the EU to an economic dead end.

So, without relatively cheap energy resources from Russia, the countries of the association will practically not be able to compete in the world market, so the European authorities have to look for loopholes in their own restrictions, the analyst added.

“So far, the EU is ready to pay for the preservation of the political image.

However, judging by the exceptions to the sanctions, they continue to hope that after the end of the conflict in Ukraine, direct supplies from Russia will resume.

Otherwise, the process of de-industrialization of Europe will continue,” Fedorov concluded.