Analysis Of The Structure Of Oil Product Prices In Russia, In The USA, And Saudi Arabia

Energy trading business

Analysis Of The Structure Of Oil Product Prices In Russia, In The USA, And Saudi Arabia
The Russian Federation.
The results of the price structure analysis for AI-92 gasoline. In the period from 2010 to 2018, transportation and sales costs in the general structure of prices for Russian oil products show significant changes from 16.3% to 30.4%
The total share attributable to the cost of oil production and refining throughout the entire period is in the range of 12.6–36.6%. This share also tends to progressively decrease, while it is worth noting that there is an increase in production costs and a simultaneous reduction in oil refining costs. From this we can conclude that the depletion of reserves is lower than the growth rate of new production technologies. Tax fees and payments increased from 42.2% in 2010 to 62.8% in 2018 of the gasoline price and have invariably been its dominant component.
Despite the fact that in value terms during the period under review, some price components increased by more than 2 times (for example, excise tax increased from 2.99 to 8.41 rubles/liter, mineral extraction tax — from 2.76 to 9.27 rubles/liter, the cost of oil production — from 0.47 to 2.81 rubles/liter), the structure has changed insignificantly. The cost of production, as the study showed, tends to increase, which is a logical consequence of the depletion of easily recoverable oil reserves. The share of oil refining, on the contrary, has been sharply reducing, which indicates the introduction of new production technologies in the oil and gas sector. The main factor affecting the cost structure of gasoline in 2010–2018 is the tax burden, which currently accounts for 62.8% of the oil product’s cost. Based on this fact, we can conclude that the rapid increase in oil product prices in the domestic can be mainly explained by the state fiscal policy.

The United States of America.
The price structure for petroleum products in the US domestic market is fundamentally different from the Russian petroleum products’ market.
From 2010 to 2018, the minimum share of taxes was 11.9%, the maximum −23.0%, which is three times lower than in Russia. The gasoline price in the United States is more dependent on the cost of oil production, whose share in the cost structure for 2018 is 59.4%, while for a similar oil product on the Russian market this indicator is 7.4%.
In the structure of prices for high-octane gasoline in the United States, transportation and sales expenses have smaller fluctuations from 4.9% in 2012 to 21.3% in 2016. The share of oil refining increased by 8.3%, the tax burden — by 3.6%.
We can conclude that there is an increase in the cost of oil production in the United States and an increase in the production of hard-to-recover oil reserves. At the same time, hydrocarbon production in the United States is indeed accompanied by higher costs, but the difference is not so great as to show such large-scale deviations of structural components. This is due to the fact that the price of petroleum products in the US domestic market is lower than in the Russian market. As a result, even the identical cost of oil production will lead to differences in the share of oil production in the total cost structure. Refining costs are growing at a moderate pace, which leads to a corresponding increase in the share of refining in the price structure.
The price of petroleum products in the United States is largely dependent on the cost of oil production. Based on this fact, we can conclude that the depletionof easily recoverable oil reserves and the development of new oil-bearing regions, which is associated with higher costs, lead to an increase in the price of oil products. Compared to the Russian market, US fiscal policy has less effect on the petroleum products’ pricing.

Saudi Arabia.
The key difference between Saudi Arabia and other countries is its unique tax policy. Since VAT was introduced only at the beginning of 2018, the tax burden before this consisted of one tax — income tax, which accounts for only 2.2% of the oil product price.
In 2018, the share of taxes in the gasoline price structure in Saudi Arabia was 7.2%, which is 2.5 times lower than in the United States and 9.4 times lower than in Russia. The dominant structural component is the cost of the oil refining process, which accounts for 52.4% in 2010 and 43.0% in 2018. The cost of oil production tends to increase, due to the gradual depletion of recoverable oil reserves.
In absolute terms, oil refining costs increased during the analyzed period, however, the value of the corresponding structural component decreased, since the cost of oil production had higher growth rates. Over the nine years, oil refining costs decreased by 9%, and the cost of oil production increased by 17%.
Based on the study, we can conclude that the prices of petroleum products in the domestic market of Saudi Arabia currently depend on the ever-increasing cost of oil production and refining costs, since these structural components are prevailing for gasoline and diesel fuel.
In absolute terms, oil refining costs tend to decrease, which is associated with the introduction of new technologies in production and exploration.
The cost of oil production is increasing due to the development of new oil-bearing regions, which is accompanied by higher costs. The tax policy of Saudi Arabia during many years did not affect the oil and gas sector and currently has a rather insignificant cumulative effect compared to the Russian and American domestic markets.
In 2018, the level of gasoline prices in Saudi Arabia approached the level of gasoline prices in Russia and the United States, which is associated with the refusal of state subsidies for gasoline by Saudi Arabia. Despite the similar price level in the three largest oil-producing countries in the world, the structure of the price of gasoline is different.

Thus, the fiscal burden prevails in Russia, in the USA the main component is the cost of oil production, and in Saudi Arabia — the cost of oil refining.