Russia’s government and domestic oil companies and refineries have agreed to freeze wholesale fuel prices until the end of the year to stop gasoline prices from going further up—a politically sensitive issue for Russian President Vladimir Putin who has seen his approval ratings drop to a 2012 low with an increase in pension age and higher prices at the pump seeping though inflation.
At a meeting this week, Russia’s cabinet, oil companies, and independent fuel refiners agreed to hold wholesale prices at June 2018 levels until the end of this year.
The agreement, which will be in place between November 1, 2018 and March 31, 2019, also includes companies boosting gasoline and diesel supplies to the Russian market by 3 percent in each of those months compared to the year-ago levels of supply.
Prices will be frozen until the end of 2018 and allowed to increase in 2019 in line with inflation.
Gasoline and diesel retail prices in Russia have jumped by nearly 7 percent since May, compared to annual inflation of around 4 percent, according to ThomsonReuters Kortes data.
But high fuel prices are one of the worst fears of any president, including Vladimir Putin, whose approval ratings have suffered in recent months, due to the pension reform lifting pension age and the higher fuel prices.
Various Russian analysts see Russia’s latest move to curb fuel price spikes as a populist move and a short-term fix to control the prices.
“What will the government do if oil prices rise and the rouble weakens? This is only a temporary stop-gap measure in comparison to the new taxation starting on Jan. 1,” Denis Borisov, director of the EY consultancy’s oil and gas centre in Moscow, told Reuters.
“The current curbing of gasoline prices is a political and populist move at its purest.” Andrei Kolesnikov, an analyst at the Carnegie Moscow Center, told Bloomberg.
By Tsvetana Paraskova for Oilprice.com
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Tsvetana is a writer for Oilprice.com with over a decade of experience writing for news outlets such as iNVEZZ and SeeNews.