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Glut in Russian gasoline exports brings crunch fears

* Gasoline exports from Russia up 32 percent in Jan-June

* Wholesale prices up 30 percent in July vs June

* Govt may restrict exports, fearing repeat of protests

By Maxim Nazarov and Vladimir Soldatkin

MOSCOW, Aug 6 (Reuters) – A dive in the Russian rouble has
propelled record volumes of gasoline to better-paying export
markets in recent months, prompting the government to consider
restricting shipments in an effort to avoid a repeat of protests
seen two years ago.

Russia, the world’s largest oil producer, slapped punitive
duties on gasoline exports in 2011 following widespread
demonstrations that challenged then-Prime Minister Vladimir
Putin over high prices and shortages.

The protests, known as the Russian gasoline crisis, became a
precursor for much larger rallies against the results of
parliamentary elections in December 2011, won by Putin’s party
ahead of his re-election as president in 2012.

Memories of that crisis have put the government on edge
after gasoline exports surged by a third in the first six months
of 2013, while wholesale domestic prices spiked by 30 percent
month-on-month in July to their highest since 2011.

“If someone raises prices at the pump, don’t hesitate to
call me any time – day or night,” deputy energy minister Kirill
Molodtsov told a meeting with officials and oil companies last
week, according to participants in the talks.

Evgeny Arkusha, head of the Russian Fuel Union, a
non-governmental organisation of small oil producers and
retailers, said the government had so far refrained from taking
extra measures to limit gasoline exports.

But given soaring wholesale prices, such steps could come as
early as this month, he added.

“Domestic consumption is rising much quicker than production
and that situation will last at least until 2016,” said Arkusha,
referring to an ongoing modernisation of Russian refineries.

Arkusha is trying to persuade the government to introduce
seasonal bans on gasoline exports lasting from May to September,
when consumptions peaks.

He says the recent spike in wholesale prices will ultimately
force retailers to charge more at the pump.

Ironically, gasoline prices at the pump of 32 roubles per
litre, or just under $1, are already around 15 percent higher in
local-currency terms than during the crisis two years ago.

They are roughly in line with U.S. prices and around half
the level seen in Britain.


Russia refines domestically roughly half its oil output of
10 million barrels per day, but the Soviet-era refining industry
has long struggled to produce enough high-quality gasoline to
meet soaring demand as people bought more modern cars.

The country’s refining sector is undergoing a huge
modernisation, expected to cost more than $50 billion and
dramatically increase the output of high-quality products.

Some recent modernisations already have largely erased
previous shortages of good-quality gasoline and Russia is able
to meet domestic needs.

However, the surplus of production over demand is not large
and seasonal spikes in consumption together with other factors
can often upset the fragile balance, like this summer.

The Russian rouble has lost around 7 percent of its value
since May, making gasoline exports more profitable than sales on
the domestic market even after paying the punitive export duty.

In January-June, gasoline exports from Russia jumped by 31.7
percent year-on-year to 2.3 million tonnes, according to energy
ministry data.

Although exports represent a tiny fraction of domestic
supply, which rose 5 percent to 17.2 million tonnes, it was
enough to upset the balance as wholesale gasoline prices surged
30 percent in July from June.

That will add to the government’s headaches at a time the
cabinet is trying to bring inflation down to 5-6 percent this
year from the current 6.5 percent.

The challenge will only increase in the next two months,
when several Russian refineries partially go offline during a
heavy maintenance period.

That may prompt the government to act early and limit
exports, although several industry sources said that could be
avoided if oil firms volunteered to halt such shipments as they
have done several times in the past when asked by the Kremlin.

“In fact we are already building large stockpiles ahead of
September maintenance,” a source with a Russian oil major said.

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