Petrol retailers might face an election price freeze in Russia
RUSSIAN fuel retailers say the authorities have told them to ensure any price rises do not exceed inflation in what is a pre-election year, a demand they say amounts to a price freeze and may bankrupt some independent outlets.
Vladimir Putin is widely expected to run for what would be a fourth presidential term in March. If he does, he is expected to win comfortably, but the authorities are known to be keen to ensure a high turnout amid signs of voter apathy.
In a country where almost 40 percent of the population drives and whose vast size means road transport is often the only option, fuel prices are politically sensitive. Price rises and petrol shortages have prompted protests in the past.
Capping prices reduces the risk of social unrest and helps keep overall inflation in check, something that goes down well with voters.
The government did a deal in 2012, the last time a presidential election took place, to limit prices.
Recommendations
Grigory Sergienko of the Russian Fuel Union, a lobby group representing 2 500 service stations, told Reuters his members had received recommendations from the authorities to cap fuel prices this year to ensure they not rise by more than inflation.
With inflation at a postsoviet low and on track, according to the government, to fall to 4 percent later this year, that was painful for retailers, Sergienko said.
“(Economy Minister Maxim) Oreshkin has said inflation this year will be around 3.8 percent.
“That means a 3.8 percent (fuel price rise) is our reference point. That, in essence, is a price freeze.”
Industry insiders and analysts said the move would squeeze already-thin profit margins.
Petrol prices in Russia have already risen by around 3 percent this year, leaving little room for further increases.
Pavel Bazhenov, from the Independent Fuel Union, a lobby representing more than 700 independent filling stations, said he believed the authorities would stop any attempt by retailers to raise prices above inflation.
Independent retailers say they want prices to go up at least 10-12 percent. There are more than 20 000 filling stations in Russia, with about half controlled by oil majors such as Rosneft and Lukoil. – Reuters