The kremlin “Has Frozen” Petrol Prices, but “Has Unfrozen” the Deficit and “Grey” Market

russia has tightened administrative control over petrol trading at the St. Petersburg Commodity Exchange, sharply narrowing the price fluctuation range for AI-92 and AI-95 to +0.01 % from the previous +0.5 %. Limits have also been introduced on the number of bids and lots from a single participant. The authorities claim that these measures are temporary and aimed at “stabilizing domestic prices” and “cooling the excessive demand”, while the central bank explained them as necessary to reduce volatility.

The market reacted negatively, emphasizing the fuel shortage rather than “the excessive demand”. According to industry estimates, russia has lost 10–15 % of its oil refining capacities, and recovery is complicated by sanctions and dependence on Western technology.

Administrative price restraint has three consequences: reduction in trade volumes, the exchange’s losing its function as a price indicator, and formation of a “grey” market. Already now, real wholesale prices outside the exchange significantly exceed official quotations – the situation copies the fuel crises of 2010–2011.

The restrictions introduced actually indicate the inability of the russian government to re- solve the problem by market methods. The pressure on the market will only increase, the deficit will grow, and the “grey” trade will become a key channel for fuel supply.