UPDATE: PM: Russia may introduce prohibitive duties on oil, oil products

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MOSCOW/ST. PETERSBURG, Oct 29 (PRIME) -- The Russian government may introduce prohibitive duties on oil and oil products to settle the situation with fuel prices, Prime Minister Dmitry Medvedev said on Monday.

“Despite the taken measures, growth of gasoline prices is still seen in a number of cases,” Medvedev said, ordering Deputy Prime Minister Dmitry Kozak, who is in charge of the fuel and energy complex, to hold consultations with oil companies over the next two days to settle the issue.

“I would like the Energy Ministry, the supervising deputy prime minister to hold consultations with our oil companies over the next few days to agree on preparing and adopting a plan of work and a regime agreement to maintain existing prices for oil products on the domestic market. Otherwise, I will be forced to sign a decision to introduce prohibitive duties on oil products just in the coming days to make the market situation more stable,” Medvedev said.

Kozak said later in the day he met with representatives of oil companies to discuss measures necessary to stabilize domestic prices for fuel. He said the situation is tense.

“We understood that it could be different – the market is market, we should react properly. That’s why in advance, already in summer, corresponding draft bills encompassed measures of quick reacting to the negative situation on the domestic market of motor fuel. At present, it is on the verge, and we will probably have to take emergency measures,” he said.

“We have just a few days left – oil companies. We need to ensure not only saturation in the volume of the motor fuel market, but on the wholesale price as well – we should ensure the necessary marginality of independent gas filling stations,” he said.

Kozak said the probability of introducing prohibitive duties on oil and oil products was high.

“The market is market. We will have to introduce prohibitive duties on oil and oil products in order to make sales of oil and oil products on the foreign and domestic market equally profitable,” he said, adding that a decision on the duties could be made already next week.

Motor fuel prices in Russia should grow within inflation, he also said.

Large oil companies have agreed to sell fuel to independent gas filling stations at prices as for their subsidiaries, Kozak also said.

“We talked with oil companies today – that taking into account their income from exports of oil and oil products – and it exists due to high prices – oil companies should show altruism and sell oil products to companies, which they do not own, at the same price as they sell to their subsidiaries in order to curb prices on the retail market,” Kozak said.

“Such proposal was supported by oil companies, but the market is market and there is quite a big number of participants of this market. There are also independent oil traders, who buy oil products on the domestic market at reduced prices and sell them for exports, which also requires separate regulation,” he said.

There are sufficient reserves of fuel in Russia, but high prices abroad stimulate companies to export and receive extra revenues, Kozak also said.

“Reserves of gasoline and diesel fuel are in a required volume now, but export alternative is very high, and it stimulates oil companies and oil traders to export oil products in order to receive extra revenues,” 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 of May 30. The government plans to raise the excise duties for gasoline from January 1, 2019.

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