Since late June diesel fuel in Russia has been more expensive than gas, and in ten cities it costs more than the AI-95 gas...
Since late June diesel fuel in Russia has been more expensive than gas, and in ten cities it costs more than the AI-95 gas. With the beginning of a harvesting campaign, diesel fuel prices got 1.5 times more expensive than gas, and the surge can be perceived in the world markets, too. Traders say that there is no deficit of diesel fuel in the market, but no one will sell it at a low price.
It’s the first time diesel fuel price exceeded the gas one in Russia. According to Rosstat, diesel fuel price grew by 1.1% weekly, whereas gas – by 0.7%. In ten regions of Russia diesel fuel is more expensive than gas: in the Krasnodar region (by 10 kopecks) and in the Stavropol region (by 50 kopecks) as well as in Khanty-Mansiysk and Northern Caucasus.
From the economic viewpoint, what’s happening now is nonsense: diesel fuel cost price is always lower than that of gas. Nevertheless, on June 22 in Russia gas was sold at 22.43 roubles per liter, and diesel fuel – at 24.04 roubles. There is no deficit in the market. In Russia the production of diesel fuel in January-May increased by 3.1% compared with the corresponding period of the previous year. Home supplies also went up by 2.78% - to 14.43 mln tons. In June drastic changes in diesel fuel reserves were registered in a few regions – in the Stavropol region, Khanty-Mansiysk and the Novosibirsk region. Still, the reserves there will last for a week at least.
Harvesting campaign must have caused the surge in diesel fuel prices: in southern Russia they have started to yield grain-crops, which often ensues an increase in diesel fuel consumption.
Yevgeny Arkusha, Chief of Moscow’s Fuel Association, says, “Large volumes of diesel fuel are exported. Diesel fuel price has been going up in the world, and the profits Russian producers get are commensurable with those of their opposite numbers in Europe.” It’s true that world markets experience the same trend. Yesterday Merrill Lynch published a review of the world diesel fuel production market where it made it the point that demand and prices have been growing everywhere, in the USA in the first place. The reason for it is the rocketing gas price, which makes car-owners use cars with diesel engines. But the prime motivator is the increased effectiveness of agriculture, which has caused a rise in demand for diesel fuel.
The Russian situation is not unique. Two weeks ago a similar trend was registered in Ukraine. At that time the AI-95 price remained 6.35 UAH, whereas diesel fuel price reached the 6.66 UAH point. Ukrainian analysts don’t expect a drastic change in the proportion of demand and supply, though they do not have the same stance regarding a further growth of prices.
In Russia the summer agricultural season can cause a permanent increase in the diesel fuel price and agricultural production as well, because diesel fuel accounts for quite a share of food stuffs cost price.
