Cabinet, Oil Product Traders Agree On Pricing Principles

Yesterday the government and petroleum product traders agreed on a pricing scheme for oil products starting January 1, 2007. According to the preliminary agreement, the expert group will suggest ‘indicative’ levels of retail and wholesale prices, which will account for monthly global prices forecasts. These indicative price levels are to be reviewed every month, or weekly during times of high volatility. Vladimir Nesterenko: Once implemented, the initiative will definitely be a positive development for the market; or at least an improvement over the existing practice of setting quasi-discretionary retail price caps. The main thing, in our view, is that the government intends to regulate not only retail prices, as it currently does, but also wholesale prices. This is likely to support stability of the margins in both retail and wholesale, but still leaves a room for discretion in regulating the profitability of market players.