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Fuel costs

04 July 2018 | Vladislav Vorotnikov

The average price for gasoline in Russia has increased by 8% during 2018, sparking strong concerns amongst logistics providers over rising costs at a time when many are suppressing service charges in the interest of retaining business.

Fuel prices are on the rise because of a number of factors, including the devaluation of the Russian ruble, the slight increase in oil prices on the global market, plus an increase in the excise rate on fuel on the domestic market. As the result, as of mid-June the price for gasoline reached 47 rubles ($0.74) a litre, the highest level seen on the domestic market.

Over the past few weeks the rise in fuel prices has sparked protests across the country by transport companies and ordinary citizens alike. The government has responded by ordering all filling stations in the country to freeze fuel prices for a month and reducing the excise rate on fuel from July 1, 2018.

However, the independent fuel companies, those that are not part of the state-owned oil-extracting giants, are concerned about bankruptcy in the coming months, given their current costs and the fixed price on the market. The Independent Fuel Union has warned that as a result the domestic market could be monopolised by oil-extracting holdings and with no competition they would have no obstacles to drive the average price for automotive fuel in Russia to Rub100 ($1.55) by the end of 2018.

Rising tariffs Transport and logistics companies in Russia have said the price hike will have an impact on the existing tariffs imposed on finished vehicle carriers in the country. Irina Novikova, inland transport department director at Russian-owned Gefco, said that the rise in prices for fuel exacerbated the impact the tariffs were having, moreso than other factors, such as restrictions on truck operations in Russia during the Fifa World Cup.

Rising tariffs

Many carriers are already operating at a loss, according to Vyacheslav Trunaev, chairman of the Siberian Transport Companies Association. The reason for that loss is that the demand for logistics services in Russia is still lagging and carriers are loathe to pass on the rise in costs by charging more for services in case they lose customers, Trunaev explained.

However, Sergey Maksikov, president of the Siberian Associationof FreightForwarding and LogisticsOrganisations, said that companies had no choice but to do so. Makisov said that the rise in fuel prices in Russia would lead to an increase in price for everything.

Against this background, several Russian news outlets have already warned that there will be a rise in domestic car prices. Russian newspaper Gazeta, in particular, estimated that carmakers had already raised the price of finished vehicles by 5% to 10% during the first half of 2018. Given the rise in fuel prices, that increase was set to continue with several carmakers announcing further increases in the sale price for their products, including Mercedes by 2% to 4%, BMW by 1% to 2% and Ford by 1%.

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