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Fuel Prices Recommended to Go Down
The Ministry of Economic Development and Trade has decided to expedite the establishment of a petroleum products exchange. It will submit a draft resolution on trading to the government in the near future, in spite of the fact that it has not yet been conciliated with the Ministry of Industry and Energy. The Federal Financial Markets Service and Federal Antimonopoly Service have signed off on the draft already. The draft resolution is expected to be considered by the government around the end of the month.
A commodities exchange for petroleum products was identified last spring as a means of countering rising fuel prices, mainly prices for heating oil for housing and for diesel, on regional markets. Luring state purchasers to the exchange is intended to combat regional monopolization and corruption among local authorities, which are the main factors contributing to rising prices. The draft resolution does not require local administrations and state customers to buy petroleum products on the exchange, although it specifies a target share for state customers by the second quarter of 2007.
Suppliers will be attracted to the exchange gradually by tying the taxes paid by oil refiners to futures quotation son the exchange. That is the system used for Rebco futures as well. Moreover, companies will be able to sell to the state only on the exchange.
Disagreement remains between the Economics Ministry and the Ministry of Industry and Energy on the mechanism for setting up the first stage of trading, that is, state purchasing on the exchange. The Ministry of Industry and Energy has not yet taken an official position on the draft. Ministry spokesmen have declined to comment on the differences between the ministries, saying only that they were “technical” and should be cleared up by the end of the week. The draft includes provisions for the establishment of a noncommercial organization analogical to the Trading Advisory Apparatus in the electricity industry to chart a long-range develop path for petroleum products trading.
In contrast to natural gas, which will begin to be traded on the Mezhregiongaz exchange on November 22, there is no shortage of oil in Russia. Therefore, an exchange must have low prices to attract traders. The Economics Ministry wants to rush the establishment of the exchange because changes to taxation mechanisms can only go into effect in 2008, and the exchange will have little influence in pricing until state purchases are redirected to it. Russian President Vladimir Putin has given an instruction to establish the exchange. Economics Ministry officials and oil company executives will meet to discuss the exchange on November 21.
www.commersant.com
All the Article in Russian as of Nov. 15, 2006
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