2023-04-26 05:30:38
The Russian government is considering cutting subsidies to oil refineries (ORs) as part of a damper to save the budget in the face of the military operation in Ukraine, Bloomberg reports, citing two sources familiar with the discussions of the initiative.
The damper is a tool to contain prices within the Russian Federation when world prices for raw materials rise. It is calculated as part of the difference between the export fuel price and the indicative domestic price. If the difference is positive, the budget pays extra to the oil companies for deliveries to the domestic market, and if the difference is negative, the oil companies pay to the budget.
According to the interlocutors of the agency, the Cabinet plans to increase the indicative price for gasoline and diesel fuel by 50%. The amount of RF subsidies for refineries is calculated using this indicator. A 50% reduction in the benchmark price might either result in a reduction in refinery subsidies or force refiners to make payments to the budget.
The interlocutor of Bloomberg said that the final decision on this issue has not yet been made. The press service of the Ministry of Finance of the Russian Federation told the publication that such initiatives “are not discussed.”
Since September 2022, the government has reduced the damper for gasoline by changing the calculation of the export price and reducing it by the Urals discount to Brent. Since the beginning of the year, it has been fixed at $20 per barrel, from April to June it will rise to $25, and then it will cease to be fixed. In addition, starting from April, the calculation of the damper for diesel fuel will change, which will take into account the Urals discount to Brent $10 per barrel. According to Archyde.com calculations, damper payments to oil companies in March amounted to 116 billion rubles.
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