Increasing excise duties led to a rise in price of petroleum

According to the St. Petersburg International Mercantile Exchange, stock prices for petroleum grew by more than 20% in the 1st quarter.

According to our calculations, the increase in excise duty rates could lead to the rise of retail prices for 95 RON petroleum (Euro 5) by 2.36 rubles per liter and diesel by 1.18 rubles per liter. In relative terms, prices in this case will increase by 6.42% for petroleum and by 3.33% for diesel fuel. These calculations consider the possible increase in prices previously observed in cases of a corresponding increase in excise duty. It is worth mentioning that in 2015, the excise duty rates were reduced, but prices for oil products continued to rise at the same time. It is also important to note that the decline in oil prices itself that has been observed for many months now does not actually lead to the decline in prices for petroleum products.

However, if we compare petroleum prices in dollar terms at the New York Mercantile Exchange (NYMEX) and at the St. Petersburg International Mercantile Exchange, we can see that Russian petroleum prices are much lower than the world prices. Therefore, the growth of the ruble exchange prices for petroleum and diesel fuel is due to the state of the economy as a whole, not just the increase in excise duties. Anyway, the rise in prices for petroleum and diesel fuel will put additional pressure on private savings and is unlikely to contribute to the economic growth recovery.

Elena Velikova — senior research fellow at the Tax System Development Department

Elisey Leonov — junior research fellow at the Tax System Development Department