Despite the relatively short duration since the beginning of the U.S. operation against Iran, this has been sufficient to increase diesel prices in the EU by 23% and gasoline prices by 3.8%. These are average values. In the UK (which is not part of the EU), gasoline prices have almost doubled (93% increase).
Traditionally, we align ourselves with the European market, even though we have not exported fuel there for the past three years. This is understandable, as all industry-tax calculations related to oil extraction and refining are still linked to the dollar value of our oil and the prices of fuel in the European market. It's no surprise that quotes at the St. Petersburg Exchange have been rising since early March.
In the retail sector, the Russian internal fuel market is under strict supervision from regulators, who aim to prevent gasoline prices from rising above inflation. However, regardless of the strict control, gas stations mostly purchase fuel through exchanges or oil depots, which, in turn, are reliant on exchange trading prices, which depend on export alternatives (fuel prices for overseas deliveries). For this reason, the government periodically imposes partial or complete bans on the export of certain fuels, making their supply to the domestic market non-negotiable. However, such bans reduce the profitability of oil refining and may lead to decreased gasoline and DT production in the medium term. Currently, there is a partial ban on the export of gasoline and DT, effective until July 31 of this year. This affects only traders and does not concern fuel producers, namely, refineries (NPPs).
As noted in an interview with "RG" by Yuri Stankevich, the deputy chair of the State Duma Committee on Energy, the direct connection to the European market is currently less than before 2022, but an indirect relationship remains. The Russian market is still integrated into the global economy through oil and export channels. The rise in global prices for oil and petroleum products increases the attractiveness of exports, reduces domestic supply, and places pressure on internal exchange quotes. At the same time, significant roles are played by processing volumes, seasonal demand, refinery maintenance schedules, and regulatory policy.
Fuel prices in Europe began to rise immediately following the commencement of the war between the U.S. and Iran.According to Sergey Tereshkin, CEO of Open Oil Market, fuel prices in the EU could reach their peak for the year in March. This, among other factors, will result in increased subsidies for our oil producers through a damper (a budget compensation paid to oil companies for supplying fuel to the domestic market at prices below export ones). The amount of payments is directly proportional to the difference between the export alternative (in Europe) and the conditional internal (indicative) price.
For oil producers, this is a positive development. They will receive additional payments, allowing them to contain the growth of internal fuel prices. However, the damper can also be negative. When the export price of fuel falls below the indicative prices, oil producers have to pay the accumulated difference to the budget. This occurred in January. In February of this year, Deputy Prime Minister Alexander Novak instructed the Ministry of Finance and Ministry of Energy to analyze proposals from oil companies regarding adjustments to the fuel damper. The goal of the adjustment is to adapt the mechanism to new market conditions and support the profitability of refining. Here, due to the outbreak of the military conflict, global prices for oil and petroleum products began to rise. On one hand, this may affect the timing and parameters of the damper correction; on the other hand, it may push exchange fuel prices upward.
However, Sergey Frolov, managing partner at NEFT Research, believes that much will depend on how long the Iranian conflict actually lasts. It is most likely that Brent oil prices will rise to $90-100 per barrel or even higher in the next 3-4 weeks. The situation will worsen if the escalation continues.
Stankevich does not believe that rising global prices will lead to a "delay" in damper adjustments. This is more a matter of budgetary priorities and the speed of legislative processes than an automatic market response. Usually, decisions are made only if the price increase is sustained and significantly impacts budget indicators. So far, there are no signs of such sustained preconditions.
A different view is held by Tereshkin. He believes that the rising damper may slow down (postpone) its adjustment, especially given that oil and gas revenues are already close to multi-year lows.
Frolov asserts that the most significant influence on the internal fuel market in Russia currently comes from tax and excise tax increases. Prices will continue to rise, especially since he does not anticipate any decline given the current levels of inflation and the key rate.
According to Dmitry Gusev, deputy chairman of the supervisory board of the "Reliable Partner" association and a member of the expert council for the "Russia's Gas Stations" competition, the price increase in Europe will certainly affect exchange prices in Russia. The attractiveness of fuel exports will rise, but it is unlikely that the conflict in the Middle East will prolong.
In addition, Gusev clarifies that the pricing agency Argus Media has officially announced that it will cease publication of price quotes for Russian petroleum products exported starting March 2026. Therefore, it is still unclear how we will continue to tie our prices to those of petroleum products in Europe. For now, the question remains open. We currently have no Russian data, no legislative changes, but it is likely that something will emerge in the near future.
Source: RG.RU
