The jump in gasoline prices pushes the economy into crisis


The jump triggered by fiscal fetishism government monopoly and the degradation of oil and gas …



Recently formed more stable and the inevitable impression that the Russian gas is not produced from oil, as it should be, but of something else. At the very least, that such a conclusion can be drawn by analyzing the dynamics of prices of petroleum products and lubricants in the last few years. When oil prices rise, Russian officials and management of oil and gas companies (including state-owned and verbally supporting increased social responsibility) refers to the common sense and explains the rise in the cost of gasoline market factors. Supposedly, due to rising commodity prices is an increase in production and transport costs, resulting in a rise in fuel prices for households and industry. At first glance, the logic of iron and nothing to complain about — a kind of explanation gasoline prices rose over the period of 2000 and 2008. almost 3-fold (from 7 to 20 rubles).

However, when in 2008, 2009. in the midst of the financial and economic crisis, paralysis interbank lending market, the crisis of confidence and credit contraction (ie, deleveraging) was blowing bubbles in commodity markets and oil prices fell by 4 times in less than six months (from 147 to $ 37 . barrel on the north mixture Brent), somehow miraculously gasoline prices not only did not decrease, but even continued his climb to new heights. Not finding adequate and sane arguments, senior government officials began to explain to citizens and representatives of the real economy, where the rapid growth of fuel prices and services of natural monopolies bring to a state of permanent and non-competitiveness of bankruptcy, it is also a manifestation of the market pricing mechanism.

Allegedly, the demand for fuel resources has grown (despite a decline in GDP of 7.8%, a slump in the industry by 15% and 3-fold drop in the production of goods of high technology industry — machine tools, instrumentation, investment engineering, vehicle manufacturing, etc.) the price of gas, water, space heating, cargo traffic grew that triggered the rising prices of gasoline and other petroleum products.

However, as far as we can judge, the situation is much more basic: Faced with repeated drop in commodity prices and export earnings, as well as the complete decline of profitability trading of oil products in the markets of developed countries (where the competition is extremely high, the profitability of gas stations does not exceed 3-4%, and 80% of the profits earned by the drive-trade goods at the gas station), Russian oil giants to monopolize the market of oil products and actively using corruption and negligence of officials, decided to at least partially compensate for their losses in foreign markets due to pocket the Russians and the domestic industry.

The abrupt rise in fuel prices amid falling oil prices

Unfortunately, similar trends are evident today, despite the fact that Russia’s best scientists and independent economists for many years, government officials explained that the unchecked growth of fuel prices and fuel makes production unprofitable vast majority of products on the territory of Russia, strengthens the processes of de-industrialization and structural degradation of the economy and stifles the remains of high value-added high-tech industry. Not to mention the fact that the rise in price of fuel accelerates the flywheel cost inflation across the spectrum of produced and imported goods, stimulates the decline in Russian life, and increases social instability. However, nothing has changed, despite the marked change in the rhetoric of the ruling powers and the constant assurances from the authorities in the "social responsibility of the state."

Table 1. Consumer and producer prices for gasoline and diesel fuel

  • schedule-oil-1
  • schedule-oil-1

Source: Rosstat

It is significant that for the period from the first half of 2012. and January to June of this year, the average price of Russian Urals oil blend has not increased, but even managed to fall by 5.8% — from 113 to 106.5 dollars per barrel. That did not prevent retail prices for gasoline rise by 8.1%, while diesel fuel went up by 12.3%. As of July 22, 2013. the average price of gasoline in Russia amounted to 29.25 rubles per liter, and diesel 30.97 rubles.

In other words, in relation to the cost of production and prices of petroleum feedstock cost prices for gasoline in the first half of 2013. rose by as much as 13.9% and diesel fuel, which keeps almost all Russian agriculture and agribusiness, has jumped in price by 18.1% in annual terms. If Russia really working mechanisms of market pricing, not distorted by monopolies, price-fixing, overcharging and rising tariffs of natural monopolies, the prices of petroleum products would have to either stay at the same level as last year, or at all reduced by 2-3%. However, they manage to grow even against a significant decline in hydrocarbon prices.

Table 2. Average consumer prices of gasoline and diesel fuel in Russia (cents per liter)

  • graphic 2
  • graphic 2

Source: Rosstat

Moreover, similar trends were observed in the previous year — in the first half of 2012. the average price of Urals oil blend rose by a slight 3.6% (to $ 112), but the selling prices of gasoline and diesel fuel at gas stations jumped by 9.7 and 14.9%, respectively. In general, according to the results of 2012. gasoline rose nearly 7.6%, despite the fact that the average price of Urals blend oil is not increased by barely visible 1% (from 109.3 to 110.5 dollars per barrel.

The main contribution to the rise in price of petroleum products made by manufacturers of products — in the first half of 2013. producer prices (ie refineries) of gasoline rose by 15.5% and diesel by 7.2%. A year earlier, in the same period of 2012, refiners lowered sale prices of gasoline by 2.3%, while diesel rose by as much as 16.3%. In other words, if the rise in the cost of fuel oil for end consumers (industrial, agricultural, agriculture, population, etc.), mainly due to higher prices for its products from the refinery, the 22% jump in the price of gasoline at the gas station in the last year and a half can not be attributed to the 13% increase in prices from the refinery. It is no wonder that even according to Rosstat, in June 2013. the average price of gasoline, depending on the type of fuel on average in Russia in the 2-2.8 times higher than producer prices, while in June 2012. This gap does not exceed 2-2.2 times.

Table 3. The ratio of producer prices for gasoline and oil in Russia:

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  • schedule-3

Source: Rosstat

At that price ratios in the oil market have not changed — the ratio of oil prices on the domestic and foreign markets decreased from 41.2% in June 2011. to
40.2% in June of this year. Despite the fact that the ratio of the price of gasoline and oil prices remained at the same level of 1.9 — about 18,533against 9,744 thousand rubles per ton.

It is significant that the rapid growth and gaining momentum in prices for fuel and motor fuel on the Russian domestic market is almost no way affiliated with a deficit of petroleum products. So, in the first half of this year, production of all grades of gasoline increased by 3.9% (to 15.7 million tons), while the decline in domestic consumption by 2.7% (to 13.6 million) and a decrease imports by 18.5% (to 0.14 million). Even the spike in gasoline exports by 36.3% (to 1.82 million tons.) Was unable to produce even a hint of a lack of fuel — gasoline inventories rose by 455.8 thousand tons, against growth of 13.1 thousand the previous year looks very impressive result.

The situation is similar to diesel fuel — production increased by 3.5% (to 28.8 million tons.), Imports fell by 10 times (24.9 tons), the volume of domestic sales increased by 4.9 % (to 11 million), while exports in volume terms and at all decreased by 0.2% (to 17.5 million tons). Not surprisingly, the stocks of diesel fuel in the first half of 2013. increased by 318.2 thousand tons, after rising by 39.6 million a year earlier.

Extremely high probability that the second half of this year, the growth rate of prices for gasoline and diesel will accelerate and by the end of 2013. reached 11% and 15% respectively (as of mid-July, an annual increase of 8.1 and 12.3%, respectively. As a result, prices for gasoline AI-95 and above will exceed 32 rubles per liter, and diesel fuel will rise to 31.5 rubles per liter. Clearly, more expensive fuel have an adverse impact not only on the general rate of growth of consumer prices in Russia that even today the official and highly unrealistic Rosstat exceed about 7.2%against 5.5% Laid down in the federal budget and 6% promised by the Government.

Table 4. Balance formation and utilization of motor fuel

Tons

2013.

Specific gravity

2013.

reference

in%

The resource%

2012.

2012.

2013.

reference2012.

Gasoline for automobiles

Resources

15450.5

15339.7

100.7

100

100

including:

15756.5

15168.8

103.9

102

98.9

production

imports1)

149.8

184

81.5

1

1.2

Changes in inventories (+, -)2)

455.8

13.1

-3

-0.1

Use

implementation on

13622.3

13998.8

97.3

88.2

91.3

domestic market

exports1)

1828.2

1340.9

136.3

11.8

8.7

Diesel fuel

Resources

28577

28098

101.7

100

100

including:

28870.3

27902.1

103.5

101

99.3

production

imports1)

24.9

235.5

10.6

0.1

0.8

Changes in inventories (+, -)2)

318.2

39.6

-1.1

-0.1

Use

implementation on

11074.3

10559.1

104.9

38.8

37.6

domestic market

exports1)

17502.7

17538.9

99.8

61.2

62.4

__________________

1) According to the Federal Customs Service of Russia, taking into account the mutual trade of the Russian Federation and the Republic of Belarus and the Republic of Kazakhstan.

2) The decline in stocks added to the amount of resources, reserves growth — is subtracted from it.

               

Source: Rosstat

The jump in fuel prices due to technological backwardness of the Russian oil and gas complex, arbitrary oil companies that monopolize the market of petroleum products, and stifling the fiscal policy of the state, which provides 55% of the retail price of gasoline, facing the Russian economy in crisis and inhibit the production and investment activity.

Recall that in the first half of 2013. GDP growth rate shrank to 1.7% (previous year more than 4.5%), industrial production grows by nearly indistinguishable from the statistical error of 0.1%, manufacturing industry is on the brink of recession (zero growth), electricity, gas and water reduced by 0.7%, the volume of freight traffic on the railways has fallen by 3%, the volume of cargo loading demonstrates the decline of 3.7%, and the volume of capital investments in fixed assets reduced by 1.4%. If another six months in the government and Kremlin officials had tried to make a "good face on a bad game" and called the crisis downturn in the real economy "opportunistic short-term cooling of economic activity", today even at the highest level have to admit that the domestic de-industrialized, desuverenizirovannaya, disintegrated and Denationalized’s economy is sinking into a state of crisis.

In the frozen Anadyr and Magadan, in sunny California

It is worth mentioning that a number of quite a depressive and technologically backward by world standards of Russian regions the average price of fuel has long been exceeded not only the world average, but even fuel prices in the major developed economies of the world. Thus, even according to official Rosstat, the management of which is difficult to accuse of wanting to exaggerate and spoil the mood of the country’s leadership, the average price of gasoline in Yakutsk reached the level of 36.4 rubles in Magadan — 37.5 rubles, Petropavlovsk-Kamchatsky — A 40.2 rubles in Anadyr, which is impossible to suspect a high energy efficiency, the development of resource-saving technologies, a mild climate and a developed knowledge-intensive industry, the price of gasoline at the gas station exceed 45 rubles per liter.

For comparison, in the United States in California, the richest and economically developed state in the United States, in whose territory the "Silicon Valley" and has the headquarters of major giants of information and knowledge-intensive industries, where traditionally recorded the highest prices on fuel, average prices gasoline does not exceed 4-4,1 dollars per gallon. For example, in Los Angeles gasoline prices are 4.04 dollars in Ventura — 4.08, and in a well-known by the older generation of the similar series Santa Barbara gasoline prices do not exceed U.S. $ 4.16 per gallon of fuel.

In terms of Russian rubles and in view of the fact that one gallon is equivalent to 3.78 liters, it turns out that even the richest and most developed states in the U.S. with advanced technology resource and energy efficiency, the price of gasoline does not exceed 36.5 Regular — 37 rubles per liter. That is, at 3-9 rubles lower than in many regions of East Siberia and the Far East. And despite the fact that the United States until recently had been the largest importer of oil in the world (5.98 million bpd), giving the palm China (6.12 million), and Russia is the largest exporter of "black gold" (almost 5 million barrels per day). In general, in the U.S. as of July 22 of this year, average prices for motor fuel in the United States brand Regular (analogue of the Russian A-95) does not exceed U.S. $ 3.68 per gallon — that is, the order of $ 0.97 per liter or the equivalent of 31.6 rubles Russian currency.

Moreover, you need to be aware of the fact that the above mapping technique in domestic fuel prices in the United States and Russia is not the only correct and contains a number of serious errors. First of all, the comparison of the price of gasoline (as well as any other goods and services in the United States, Russia and other countries of the world) at the current market exchange rate does not account for differences in purchasing power of national currencies. As you know, the real purchasing power of the Russian ruble is much higher than reflected in the currency market value of the ruble against the U.S. dollar — 17-18 rubles to the dollar instead of 32.5 rubles. In other words, for one U.S. dollar converted into Russian rubles at the current exchange rate of
Russian can buy twice as many goods and services than in the U.S..

If you count the price of gasoline (as well as all fuel and other goods) of the purchasing power of the Russian ruble and the U.S. dollar, it would appear that the price of gasoline in Russia on average more than twice the average for the United States — 2, $ 1 vs $ 1 And despite the fact that the real level of life in Russia, at least 2-2.5 times lower than in the United States at comparable scale the property abyss.

Whereas in Anadyr, as in many other are in severe climatic and natural and geographical conditions of the regions of Russia, the price of gasoline and does exceed the average for the United States to 2.8-3.1 times. It is extremely difficult to imagine that the Russian de-industrialized hinterland and are depressed regions dropped as a result of "market reforms", the destruction of industrial and technological capacity building and technical degradation of 40-50 years ago, forced to purchase fuel at exorbitant prices many times, are able to make at least some -that competition is not only economically developed countries, but generally at least someone.

Technological backwardness, tyranny of oil giants monopoly and fiscal burden of government dispersed fuel prices

It is not clear how the Russian fuel and fuel manage to rapidly and continuously go up at a time when the prices for the hydrocarbons from which they are produced. In fact, the reason for non-stop rise in fuel prices, which blocks the growth, increases depression in the industrial complex and provokes appreciation of all other goods and services, inflation spinning flywheel, in the expert and the scientific community has long been known.

One of the main reasons is extremely high degree of monopolization of the market of oil products — the largest vertically integrated oil companies (VICs) has consistently abused its dominant position and enter into price fixing and cartels. Under present conditions it is much easier and more profitable to inflate the price and pay a fine of FAS several billion rubles, you enter into a fair competition for the consumer.

Used in the present fines in relation to oil and gas giants of the FAS are not critical and in most cases oil companies (including state-owned and referred to as a "national treasure") is much more profitable to agree on price fixing, set monopolistically high prices for fuel and to withdraw its monopoly rents than give up the idea under threat of a fine.

Figure 1 Change in the depth of oil processing depending on the development of technologies

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  • schedule-4

Source: State University of Oil and Gas named after IM Gubkin

Recall that at the moment the largest in size sanction is a requirement of FAS Rosneft to pay 5.28 billion as a penalty for price fixing. However, thanks to the lobbying power and administrative resources of Russia’s largest oil company managed to get FAS to conclude a settlement agreement and reduce the amount of the penalty is 2.5 times — from 5.28 to 2 billion rubles. In total, during the period from 2008 to 2010. FAS fined oil giant for 26 billion rubles, which is a drop in the bucket of the largest vertically integrated oil companies. Due to the increase of prices of gasoline by at least 1 ruble, the Russian oil and gas companies in 2012 alone. could get additional income of $ 30-32 billion. It is clear that "the game is worth the candle" and profit potential at times exceed the potential losses.

Moreover, the scarcity of petroleum products in the domestic market due to the extremely low level of technological development of the petroleum industry — oil refining in Russia does not exceed 72%, whereas in the major developed countries 95-98%. If in Soviet times such low level of processing raw materials and production of petroleum products was due to the need for heating (both in industry and for heating), but today it is due to the reluctance of the largest Russian oil and gas giants to finance the modernization of production, import or develop modern management and production technologies and lack of competition in the oil market. Worse, in the structure of production of petroleum products

Another problem — the extremely low yield of light grades of oil products (gasoline, kerosene, diesel fuel, etc.) with an excess of dark fractions (fuel oil, heating oil, etc.). Modern refineries equipped with equipment for deep processing of oil, achieving a very high yield of light oil products even from heavy oil. This becomes possible by using so-called destructive processes primarily catalytic cracking and hydrocracking. For example, in Russia the share of gasoline accounts for only 15-17% of all oil produced, 3.5-4% — for jet fuel. While the share of heavy fractions has produced the vast majority of refinery production — oil provides 29-30% of oil and diesel fuel order 29-29,5%. The remaining accounted for the other types of petroleum products, as well as the loss in production.

According to expert estimates, the presence of the refinery technologies straight distillation of crude oil and plants, improve the quality of virgin fractions, can not get the depth of more than 60%. Availability of technologies for processing vacuum gas oil refining depth increases to 75 — 80%. And only the processing of tar and heavy residues of secondary processes allows refineries to cross the threshold of 85 — 90%. Upgrading of domestic refineries at the present level of development processes require huge costs — it’s about 1.5-2 trillion. rubles in the coming years. However, neither the Russian oil and gas giants (The reporting record profits and choking from the influx of petrodollars) or the state (which in foreign exchange reserves (Reserve Fund and National Wealth Fund) and on accounts at commercial banks is around 6.6 trillion over. Rubles), as far as You can tell, as long as this issue seriously do not want to deal with.

However, in the majority of Russian oil and gas companies, even during the extremely favorable external economic conditions and rising prices for oil chose not to invest in the modernization and technical upgrading capacity. As a result, there has been an extremely high degree of obsolescence and depreciation of fixed assets at the refinery — the official data of Rosstat it reaches 55%, while according to experts have long exceeded 70-75%, came close to the critical threshold.

It is said that at the moment in Russia operates 27 major oil refinery (capacity from 3 to 19 million tons.) And about 200 mini-refineries. The installed capacity of all refineries is about 270-275 million tonnes. Despite the fact that the proportion of plants put into operation more than 60 years, accounting for more than 52.6% of all refineries, 22.3 — commissioned 50-60 years, 22.3% — 30-50 years ago, and 2, 8% — less than 30 years ago. In addition, the Russian oil refineries about half of the furnace units have an efficiency of 50 — 60%, while the average in overseas factories — 90%. In addition, the value of the notorious Nelson index for the bulk of Russian refineries significantly below the average of this indicator in global average — about 4.4against 6.8.
The maximum index of Russian refineries is less than 8, and the minimum is lowered to 2, which is due to the low depth of oil refining, poor-quality petroleum products and technically obsolete equipment.

In addition, it should be a very unfortunate geographic location of the major Russian oil refineries and oil storage facilities in Russia — in most cases, they are at a great distance from the end-user fuel, which automatically increases the transport costs and the effect on the price of fuel. Also on the rise in the cost of fuel affects the growth of the fleet, the intensified closure of large refineries for major repairs and reconstruction, omissions FAS, increasing the tax burden on the oil giants following the increase in energy prices on the world market, etc.

Half the price of fuel — in the pocket of the state and in "deathly stash"

However, the main reason for providing on the one hand the rapid rise in the cost of petroleum products, on the other hand such high fuel prices, is the state itself. A more accurate to say they pursued tax policies. According to estimates of the RAS and independent experts in the structure of the retail price of petrol at filling stations in Russia for at least 52-55% are all kinds of payments in the budget system. Approximately 15.2% is VAT, 15.5-16% — for excise, 15-17% — for MET, 6.5% — other taxes (profit organizations, payroll, property, etc.) .

Fig.1. The structure of the retail price of gasoline and diesel fuel in the United States as of mid-July 2013.

  • schedule-5
  • schedule-5

Source: Ministry of Energy, Ministry of Finance, Customs,State University of Oil and Gas named after IM Gubkin

The share of oil companies, refineries, oil traders, freight companies and gas stations to not more than 45% of the price you pay and the citizens of the Russian production facilities at petrol stations and tank farms. So, 6.2% is deposited in the pockets of gas stations in the form of trading profits and margins, 10% came from profits of oil companies, 16.5% — the cost of transportation and marketing, 1.3-1.5% — the cost of processing, then as the cost of oil production accounts for only 6.5-7% of the retail price of gasoline. A similar situation is observed in the retail diesel fuel — in the structure of the retail price of diesel fuel for at least 50-52% and accounted for the payments to the budget system.

Fig. 2 Structure of the retail price of petrol and diesel in the U.S. as of mid-July 2013.

  • schedule-6
  • schedule-6

Source: US Energy Information Administration

Even today, the state where desired and political will could at least halve the price of petrol, diesel and other SGM. If Russian officials put national interests and the interests of the domestic non-oil industry and the population is higher intra ambitions and policies of the Ministry of Finance to report the accumulation of reserve funds, today the price of gasoline at the gas station in Russia would not exceed 15-16 cents per liter instead of 30-32 rubles, which We have in fact. Even in a situation where the Ministry of Finance around in the "oil and gas pod" (ie, the Reserve Fund and National Welfare Fund — 5.6 trillion. Rubles in total) and deposits with commercial banks ($ 1 trillion. Rubles) is of the order of 6 6000000000000. rubles, the government continues frantically and purposefully deplete the domestic economy by removing the alleged "excess" money supply and "unearned" oil money under the guise of arguments about the need to align internal and external energy prices in order to stimulate the modernization and innovation.

If by energy efficiency and resource-saving technologies to understand the decay of the domestic manufacturing industry, the decline of non-resource industries, structural and technological degradation, the Government of the brilliant performance targets, transforming Russia into a raw materials colony tank and financial market for the products of multinational corporations.

It is significant that this kind of fiscal fetishism and irrepressible zeal of the Ministry of Finance at any cost and in that that was seen to fill the budget in Russia is not the first year. While in developed countries with a diversified economic structure, promote scientific and technological innovation and potential, as well as a powerful and competitive export of high-technology products that fetch an innovative, not an archaic natural resource rents, such excesses are not allowed. Thus, according to the Energy Information Agency estimates that the U.S., in the structure of the retail price of gasoline at the gas station more than 66% is the cost of oil, 12% — for refining, 11% — for transportation and marketing, and only 11% — for payments to the budget.

In other words, the U.S. government is struggling to reduce the burden on the U.S. refining complex in order to reduce the prices of petroleum products, reduce costs, households do not allow promotion of the flywheel to contain inflation and rising costs in the industrial sector and the energy sector. In Russia, the situation is strictly opposite. As far as can be judged, Russian Finance Ministry, in principle, are not interested in the crisis situation in the Russian economy, the chain price increase of goods and services considered essential because of the abrupt growth of fuel prices and, consequently, lower the standard of living of the vast majority of Russians and a chronic lack of competitiveness of the domestic manufacturing industry, which leaps steps sinking into crisis. And the rise in the cost of petroleum products, provoking a rise in prices for goods and essential services, which account for 50-80% of spending 70% of Russians, only reinforces the crisis tendencies in the economy and accelerates from slipping into a systemic crisis.


Vladislav ZhukovskyRussian folk line


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