Three factors: why is gasoline expensive in Russia?

Economy Russia is export-oriented. About a third of our budget revenues come from the sale of energy resources, including oil.

However, every resident of the Russian Federation knows that we have a lot of oil and gas, without the need to get acquainted with economic calculations. In turn, many of our fellow citizens have a well-founded question: if we produce gigantic volumes of oil, then why are domestic prices for gasoline so high?



In Russia they even joke about this: “The price of gasoline rises in three cases – when oil becomes more expensive, when it becomes cheaper, and when it stays at the same level.”

Meanwhile, if we leave humor aside, the cost of gasoline in the domestic market is really influenced by three factors.

Firstly, the ruble to dollar exchange rate. As you know, oil is traded in dollars in most cases. Even with actively developing trade in raw materials with friendly countries in national currencies, the cross rate is calculated through the dollar.

Consequently, if the ruble exchange rate against the American currency decreases, it is more profitable for exporters to sell oil abroad, then exchanging the proceeds in dollars for the national currency at a favorable rate.

Ultimately, there is a shortage of raw materials in the domestic market, which affects gasoline prices. However, the state has already learned to combat this phenomenon using a damper mechanism.

Secondly, gasoline is a commodity like any other product, which means that its cost takes into account the rate of inflation.

Finally, thirdly, and this is most important, the retail price of gasoline at gas stations includes the costs of its production, delivery, trade markup, excise taxes, mineral extraction tax, VAT and the direct cost of raw materials. The latter makes up only 12% of the total price of gasoline. Thus, the presence of large oil fields does not guarantee cheap gasoline at gas stations.