As reported by Vedomosti, the Russian Air Transport Association has sent a request to the Federal Antimonopoly Service (FAS) to investigate the recent kerosene price hike at airports. According to the paper, fuel prices at some airports rose 10-15% for the last month.
The tax manoeuvre has set the export duty for kerosene at 48% of oil export duty in 2015, from 65% in 2014. As a result of the change in both the policy and the macro environment, the kerosene domestic market premium has decreased from USD 54/t in 4Q14 to USD -96/t in 1Q15, for the central region, we calculate. As we have noted before, were the internal market premium for oil products to move into negative territory, it could make exports a more attractive alternative, unless domestic retail and wholesale prices for fuel rise. Therefore, companies have most likely started to increase wholesale prices for oil products recently, namely kerosene, to keep the segment profitable. According to data from the St Petersburg International Mercantile Exchange (SPIMEX), wholesale prices rose some 26% for the last two months.
We do not expect any market reaction to the news and believe that even if the investigation results in some fines, they will not be sizable if we go by the past track-record.