Fuel retailing in Russia has lost its profitability

Participants of the Russian fuel market are concerned about the possibility of bankruptcy of independent gas stations. A public statement about this was made by the representative of Shell corporation Vitaly Maslov. According to the expert, the current situation on the market, associated with the outstripping growth of wholesale prices for diesel fuel and gasoline, can drive about 60% of the market to bankruptcy.

Russian oil refiners export up to a half of all produced diesel fuel and about 15% of gasoline. The reason for such a policy of refineries is more attractive prices for maximizing profits.

The gradual equalization of prices is causing the rise in prices within the country. In 2021, it was about 25-30%. However, retail prices increased by only 3-6%. Will the independent sellers (their market share is about 2/3 of all filling stations) be able to withstand such a disparity, working 8 months below the profitability threshold?

Pavel Bazhenov, the managing director of the Independent Fuel Union, gives a pessimistic assessment of what is happening in the market. In an interview with Gazeta.Ru, he announced the losses that plagued independent operators in recent months. He called the situation with fuel in Eastern Siberia and the Far East especially difficult,as the problem of a shortage of raw materials on the wholesale market remains there.

Large companies will surely endure a period of negative margins. According to Maslov, who holds the post of director for development of the Shell's gasoline stations chain, this year, each liter of retail gasoline brings in 1.5 rubles of loss.

Vertically integrated firms, which have the opportunity to sell fuel in bulk and export it abroad, will be able to survive the crisis. Their integrated margin easily covers the retail losses. However, there are less than a third of such filling stations in the Russian market. The majority of operators will face bankruptcy.

According to experts, the current damper mechanism used in Russia discriminates against independent retail entities. Large oil holdings receive subsidies from the state, allowing themselves to wholesale at higher prices, and keep the low costs of fuel at the gas stations under their control.

This leads to the monopolization of market, in which only the big players will survive. Most likely, the fuel market will face the active intervention of the authorities and even the introduction of bans on the export of fuel abroad, if the situation is not normalized in the nearest future, suggest the analysts.