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Russian fuel retailers complain of pre-election price cap
April 28, 2017 / 2:55 PM / in 8 months

Russian fuel retailers complain of pre-election price cap

MOSCOW, April 28 (Reuters) - Russian fuel retailers say the authorities have told them to ensure any price rises do not exceed inflation in what is a pre-election year, a demand they say amounts to a price freeze and may bankrupt some independent outlets.

Vladimir Putin is widely expected to run for what would be a fourth presidential term in March next year. If he does, he is expected to win comfortably, but the authorities are known to be keen to ensure a high turnout amid signs of voter apathy.

In a country where almost 40 percent of the population drives and whose vast size means road transport is often the only option, fuel prices are politically sensitive. Price rises and gasoline shortages have prompted protests in the past.

Capping prices reduces the risk of social unrest and helps keep overall inflation in check, something that goes down well with voters. The government did a deal in 2012, the last time a presidential election took place, to limit prices.

Grigory Sergienko of the Russian Fuel Union, a lobby group representing 2,500 service stations, told Reuters his members had received recommendations from the authorities to cap fuel prices this year to ensure they not rise by more than inflation.

With inflation at a post-Soviet low and on track, according to the government, to fall to 4 percent later this year, that was painful for retailers, Sergienko said.

“(Economy Minister Maxim) Oreshkin has said inflation this year will be around 3.8 percent. That means a 3.8 percent (fuel price rise) is our reference point. That, in essence, is a price freeze.”

Industry insiders and analysts said the move would squeeze already-thin profit margins and, while service stations controlled by oil majors would be fine, some independent ones might go out of business.

Gasoline prices in Russia have already risen by around 3 percent this year, leaving little room for further increases.

But the FAS, Russia’s state anti-monopoly office, rejected Sergienko’s assertion, saying the market - not the government -decided the price of gasoline.

“The market is not regulated. For the past few years prices at filling stations have been rising in line with or even a bit lower than inflation,” said Dmitry Makhonin, an FAS official.

Pavel Bazhenov, from the Independent Fuel Union group, a lobby representing more than 700 independent filling stations, said he believed the authorities would stop any attempt by retailers to raise prices above inflation.

Independent retailers say they want prices to go up at least 10-12 percent.

There are more than 20,000 filling stations in Russia, with around half controlled by oil majors such as Rosneft and Lukoil. (Writing by Vladimir Soldatkin; Editing by Dale Hudson)

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