If India and China abandon our oil, fuel prices will go up — expert

Will gasoline and diesel become cheaper in Russia if India and China refuse to purchase Russian oil due to 100% US duties? The question arose because meat, fruits, and coffee fell in price in Brazil by an average of 8-10% after the introduction of 50% duties on their imports to the United States, as they entered the domestic market, increasing supply.

Expert of the Financial University under the Government of the Russian Federation Igor Yushkov in a comment for Pravda.Ru doubts that prices for refined oil products in the Russian Federation will decrease due to an increase in supply.

"I do not think that gasoline will become cheaper, but, on the contrary, it may become more expensive, because our oil export revenues will then decrease significantly," the analyst said.

According to him, in this case, the government will try to reduce budget expenditures by "radical savings", for example, by canceling the damping mechanism — a tool used to stabilize gasoline and diesel prices in the domestic market due to changes in world prices. In Russia, this mechanism has been operating since 2019.

"We have one of the lines of budget expenditures — these are payments under the so-called damping mechanism. This is the difference between prices on the foreign market and on the domestic market, which the state wants to see on the domestic market. And in order to reduce budget expenditures, this damper may well be canceled," Igor Yushkov said.

In addition, the expert recalled that Russia is an important exporter of oil, therefore, with the cancellation of purchases by India and China, the price of oil on the foreign market will rise, and, consequently, on the domestic market too.

"That is, for oil refineries in the Russian Federation, the price of oil can rise to the level of the world minus the cost of delivery," said Igor Yushkov.

Also, the price of 1 liter of gasoline contains up to 80% of all kinds of taxes and state fees that go to the budget, the expert recalled. In the sum of these three factors — savings on budget expenditures, global oil price growth and the need to support tax collection, as a result, it may turn out that, "on the contrary, the price of fuel in the domestic market will rise," the expert concluded.

Two days ago, against the background of rising gasoline prices, the Russian government imposed a complete ban on the export of this fuel until the end of August. The decision was explained by high seasonal demand and agricultural work.