Fuel prices spikes linked to inflation and Russian oil tax reform

By Kh.KHALIUN
After being informed that fuel prices would increase by 300 MNT, all Mongolians with vehicles stood in queue at the petrol stations. From January 7 this information spread so from 7 p.m. until 4 a.m. vehicles waited their turn at petrol station to fill their vehicles bank. This line continued for 20-30 meters and caused many traffic jams.
Petrovis and Sod Mongol Companies petrol stations were overloaded, because these stations didn’t increase the fuel price, and some branch stations ran out of fuel. Servers of these petrol stations said: “We didn’t receive statement to increase the price, so we selling fuel by the old price. The main resource of fuel of our company didn’t finish, so just the branch stations ran out.”
Some citizens think that MT-Oil Company increased the fuel price on their own which influenced other stations. They think this because of MT-Oil Company was the first to increase their price by 260 MNT. Petrol AI-92 was 1590 MNT, but after 10p.m. it turned up to 1850 MNT. And also other petrol AI-80, AI-95 and diesel fuel increased. We wanted explanation about this from MT-Oil Companies administration, but they refused to give report claiming that they would give a press release on Monday.
On January 7 Parliament discussed about the fuel price rise. They said they would discuss the issue at a press conference. The conference’s date is still being debated.
Taxi services, supermarkets and shops have already increased their price, triggering a rise in fuel prices. This shows how directly linked the economy is to fuel price fluctuations. If the prices continue to rise, lifestyles will inevitably change. The Russian Government approved the 60/66 oil tax reform on October 1, 2011. So Mongolian Government received information about impending spike of fuel prices in October. Russia came off with drawback of oil, so the radical change made to policy of oil export. The tax of crude oil import decreased to 60 percents from 65, but tax of all fuels import increased up to 66 percents. They explained this as a policy to support domestic usage. According to Russian economic indicator of 2011, companies which operate through export had most high income, such like Rosneft, LUKOIL, TNK-VR and Surgutneft Company. Currently, Mongolia is importing fuel from Rosneft and TNK-VR.
Mongolian economic is growing fast and on top of this the usage of fuel and energy has increased. If the resource of diesel fuel is extensively depleted, this will directly affect the mining industry. Thus, the Ministry of Mineral Resources and Energy has made it an obligation to prepare a back up diesel fuel fund.
The price, which is newly hanging on petrol station’s price boards, may hang through all 2012. So, it’s time to discuss how to hold inflation stable, not how to decrease the fuel price. The fuel price will not decrease, under Russia’s 60/66 policy. But the rising price of other goods, following the fuel price will continue to have a direct influence on inflation.

Source:UB Post
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