Bloomberg News

Russia May See Fuel Shortages as Export Tax Falls, Analysts Say

October 17, 2011

Oct. 17 (Bloomberg) -- Russia may encounter short-term shortages of oil products such as gasoline and winter diesel as demand grows, refineries conduct seasonal maintenance and export duties fall, encouraging shipments abroad, analysts said.

Repairs on refineries in September and October have led to a scarcity of products including gasoline, jet fuel and diesel on a wholesale level, Alexander Nazarov, an oil and gas analyst at OAO Gazprombank, said by e-mail today.

“That together with new duties and increased demand could create a temporary shortage,” Nazarov said. The shortage may be felt for only one or two days by end users, he said.

Prime Minister Vladimir Putin this month lowered the export tax rates for crude and some products to spur investment in the world’s biggest oil producer. The new tax remains indexed to world oil prices while lowering the percent of the state’s take, except on gasoline and fuel oil.

“We are sure that there is a shortage of gasoline and jet fuel,” Alexander Kirevnin, an oil and gas analyst at VTB Capital, said by phone today. Shortfalls in gasoline, jet fuel and winter diesel may grow as Russian demand outpaces the production capacity of the country’s mostly Soviet-era refinery stock, he said. This problem won’t be solved quickly as it requires that companies invest in refinery upgrades, he said.

Falling Duties

Russia bases the export duties on the average Urals price from the 15th day of one month to the 14th of the next. Urals, Russia’s benchmark export blend, averaged $108.06 during the most recent monitoring period, Alexander Sakovich, a Finance Ministry adviser, said by phone today.

The standard duty on crude exports will probably decline 4.5 percent to $393 a metric ton ($53.62 a barrel) on Nov. 1, if the government maintains a reduced tax rate of 60 percent which was applied this month, according to Bloomberg calculations based on Finance Ministry data. The duty was set at $411.40 a ton this month.

The levy on middle distillates, like diesel, will fall at the same rate after plummeting 8.7 percent this month with the introduction of Putin’s new rate.

State pressure to hold down gasoline prices as parliament and presidential elections approach led to motor fuel shortages earlier this year. The state responded by raising the export rate on gasoline from May.

The tax on gasoline may fall to $353.70 a ton, Sakovich said. That is 90 percent of the crude duty. Other products are taxed at 66 percent of the crude rate.

--Editors: Alex Devine, Randall Hackley

To contact the reporter on this story: Stephen Bierman in Moscow at sbierman1@bloomberg.net

To contact the editor responsible for this story: Will Kennedy at wkennedy3@bloomberg.net


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