Russia raises oil export tax rate. Gasoline will cost more
Gasoline will cost more in Ukraine since October 1, Ministry of Fuel and Energy informed Thursday, September 26. The reason is Russia’s decision to increase the export duty from $21.9 to $26.2 per ton. Ukraine is not a member of the CIS customs union, meaning that oil will cost considerably more here. Thus, the oil refinery of Kremenchuk will receive the raw fuel at $190-200 a ton (compared to $170 now).
MFE did not have the nerve to forecast filling station price jumps and nor was the question answered by consultations with companies supplying oil to Ukraine. The government seems to have managed to persuade the oil traders — that are simultaneously owners of refineries — not to let the prices soar all at once. “They promised to reallocate their export duty disbursements among different fuel grades. Thus, fuel oil will go up a little higher and gasoline perhaps a little lower,” said first MFE deputy state secretary Anatoly Korzun, but he could not quote the cabinet’s arguments in the discussion with the oil companies. It is anyone’s guess, therefore, what can make the refinery owners contain the prices. Possibly, different filling stations will show different price jumps.
Characteristically, Moscow decided to increase the oil export duty without any previous consultations with Kyiv, although earlier both presidents had instructed their cabinets to inform each other of such intentions. The main reason for the tax increase is that Russia will have to repay huge debts to foreign creditors — over $20 billion. The oil export duty is a very substantial Russian budget item. In other words, Ukrainian drivers will start paying their northern neighbor’s external debts in October. In 2003, Russian budget tax returns from oil supplied to Ukraine will reach $0.5 billion.
However, an overall lapse in the Ukrainian market’s price attractiveness to Russian oil suppliers may well be an even more serious threat. Their supplies to Ukrainian oil refineries have noticeably decreased of late, so the trend is bound to strengthen after increasing the export duty. TNK, for example, makes no secret of the fact that it earns more now, supplying oil to Kazakhstan or China than to Ukraine. Even if oil is transported through Odesa to the Mediterranean region, Russian companies are likely to gain more than when keeping oil for processing and supplying gasoline to Ukraine.
Nevertheless, MFE assured that the Ukrainian refineries have sufficient fuel reserves to supply the domestic market. It is also sure that Russian companies controlling most Ukrainian refineries and filling stations will not speculate and upset the market. Ministry officials refer to a memorandum on cooperation signed between the cabinet and the largest oil traders. And so fuel prices will go up, although no one knows exactly how high — presumably 10-20% for car fuel grades.
