INTERVIEW: Gasoline price rise not to top inflation rate in 2019

MOSCOW, Aug 15 (PRIME) – The gasoline price rise will not overshoot inflation in 2019, Dmitry Makhonin, director of the fuel and energy department at the Federal Antimonopoly Service said in an interview with PRIME released on Wednesday.

“We hope that the market will see no price shocks (in 2019) including the global fuel price. We can see no prerequisites for the (fuel) price growth to exceed the inflation rate yet,” he said.

Fuel prices grew rapidly in Russia in April and May. The government had to cut the excise duties on gasoline and diesel fuel, and agreed with the largest oil companies to fix prices at the level as of May 30 while the government was working on measures to support the industry.

Makhonin said that the government is considering adjusting the fuel intervention mechanism to hand the initiative to the Energy Ministry and reduce the decision-making timeline to a week from two months.

“At the time that the government was negotiating moves to stabilize the fuel market in June we initiated discussion on fuel interventions by the Federal State Reserve Agency. As a result, (the government) authorized its experts to consider the issue,” he said.

“Now the interventions may be initiated by (Russia’s regions) if the retail price rises more than 10% within a month. The mechanism takes two months from initiating the issue till the moment of intervention.”

The official added that the current mechanism forces the Federal State Reserve Agency to sell oil products at a bad time, including in winter when demand is low.

“The right to initiate such interventions should be transferred to the Energy Ministry from the regions. They also should be implemented promptly taking no more than a week from the moment of making the decision … The goods should be sold using commodity exchanges to prevent unreasonable pricing,” he said.

“We also need to work out the conditions under which the interventions are initiated... The growth of the price on a bourse by more than 10% during a month seems reasonable.”

Makhonin also said that his agency and the Energy Ministry plan to send to the government until September 1 a draft mechanism to calculate gas deliveries prices for private gas producers. The new scheme may be used to adjust the tariffs already in 2018.

In June, the watchdog released a draft order envisaging a 3.4% adjustment of tariffs of state gas giant Gazprom, the sole domestic main gas pipeline owner, for gas shipments by independent gas producers from July 1, but the decision has not been made so far.

In July, business daily Kommersant reported that Gazprom could sue the Federal Antimonopoly Service for not allowing the transportation price for independent producers to rise resulting in a 17 billion ruble loss in 2018 for the monopoly.

Makhonin also said that the authority suggests delivering South Korean oil products to Russia’s Far East, where prices are high because of low competition and poor infrastructure, instead of from European Russia. The products from the European part of Russia will then be exported to Europe.

End