Gasoline and diesel in retail prices have been falling for eight weeks in a row. So far, gas station prices have been rising almost continuously since the end of 2020. On average, the decrease in retail prices for gasoline is small – by 19 kopecks, for diesel fuel it is more significant – by 50 kopecks. But after almost a year of growth in prices at filling stations, the trend is very positive. And what is important, according to the senior analyst of the IG “Petromarket” Maria Arie, there are no reasons for the reversal of prices to increase now.
The reasons for the decline in prices for gasoline and diesel are the reduction in the export of petroleum products from Russia. Supply in the domestic market has seriously outstripped demand. Oil companies supplied the European market with half of all diesel produced in Russia, and up to 10% of all gasoline output went abroad. And now export to the West is difficult. And here the dynamics of wholesale fuel prices is very indicative.
Since the end of February, the average wholesale prices of domestic oil refineries (refineries) for AI-92 and AI-95 gasoline have fallen by 25% and 22%, respectively. This was the result of a surplus formed in the domestic market – gasoline stocks at refineries and oil depots increased by almost 8% over the past month, exceeding 2 million tons, Arie notes.
Wholesale prices for diesel fuel also decreased, although not so significantly – by 5%. But its supply on the domestic market grew much more than gasoline, as large volumes were sent for export. Hence the strong decline in retail prices.
The increase in fuel supply is not currently accompanied by an adequate growth in domestic demand, the expert explains. Car owners are reducing their use of cars from what might have been the norm in pre-crisis times, due to falling real incomes or growing risks of such declines in the future.
According to Arye, domestic demand is also negatively affected by emigration, job loss, forced “holidays” or the transition to remote work. In addition, the level of use of personal vehicles is declining due to the fear of owners that they will face difficulties when carrying out maintenance or repair of cars due to the decision of many car brands to suspend their activities in Russia.
As a result, there are no prerequisites for the growth of retail prices for gasoline, the expert believes. But the direction and pace of price changes at filling stations in the next two to three months will largely depend on the balance of supply and demand for the product on the Russian market. For example, if demand starts to grow due to an increase in domestic tourism, then while maintaining the current level of production, retail prices may return to growth, which, however, is unlikely to catch up with the current level of inflation, the expert notes.