The cost of gasoline: pricing principles, calculation examples

2024 Author: Howard Calhoun | [email protected]. Last modified: 2023-12-17 10:16

Car owners are concerned about rising gasoline prices. In 2019, the cost, according to experts, may rise to record levels. Drivers are interested in what caused this phenomenon, what makes up the cost of gasoline. In order to delve deeper into the essence of the problem, you need to consider what makes up the price tag for automotive fuel, what features this process accompanies. An example of cost calculation and expert explanations will be discussed below.

Market situation

The cost of gasoline in Russia is formed under the influence of many factors. Rising prices have been observed for the past 20 years. Domestic drivers have already got used to this circumstance. But this year, even they were shocked by the country's oil companies. The increase in gasoline costs has increased so much that even pedestrians have felt it. Travel for them in public transport is alsohas risen in price.

It should be noted that over the past 20 years, the cost of gasoline has risen significantly. But the cost of fuel production remained the same. The development of the oil production market has led to an increase in the price of a barrel from $12 in 1998 to $135 today. This is due to growth, market development.

To calculate the cost of gasoline in Russia, you need to delve into all the subtleties of this process. Many of our compatriots are surprised why in a state where oil is produced, gasoline for the population is sold at market value. So, for example, in the UAE, Venezuela, the cost of fuel did not increase on the domestic market.

Of course, the cost of Russian gasoline remains the lowest in Europe. But this does not prevent us from maintaining the price of fuel in the country at the market level. In this, our country is fundamentally different from the same Venezuela, where at the beginning of 2018 the cost of a liter of gasoline was $0.02. In modern Russian realities, this seems to be fiction. How is the cost calculated? Why is the cost of gasoline in some countries ten times less than in Russia? This issue needs to be looked into in more detail.

Cost components

How is the cost of 1 liter of gasoline calculated in Russia? We need to consider this procedure in detail.

So everyone knows that gasoline is made from oil. For this, 2 methods are used:

• straight distillation;
• cracking (catalytic or thermal).

Toto extract oil, you need to find its field, carry out geological development. Only after this is drilling carried out. Then the mined mineral is transported to a plant where processing is carried out. Then the finished gasoline is transported to gas stations.

The company that made the fuel must pay a number of taxes and excises. This also affects the cost of a liter of gasoline. To display the cost of a liter of gasoline, you need to specify the entire chain of production costs:

1 liter of gasoline=exploration cost + transportation + processing + retail sales + income tax + excise duty + VAT + MET + total profit.

Each item needs to be said in more detail. Geological exploration work is carried out in our country in the northern regions. It is cold here almost all year round. Also in such areas there is no developed infrastructure. To extract oil here, it is necessary to transport equipment over a long distance, build long oil pipelines. Also, transportation is carried out using tankers, tanks, etc. On average, the cost of exploration and production of oil is 9.5-10% of the price of a liter of finished product.

Other expenses

To calculate the cost of gasoline, you must also take into account the cost of transportation. This figure depends on many factors. The distance of the location of the refinery from the place of extraction of minerals, the type of transport, the cost of its maintenance are taken into account. The most modern way isapplication of pipelines. But even they need to be serviced. The cost of transporting oil averages 1.2% of the total cost of a liter of gasoline.

Further, raw materials are processed using modern techniques to obtain the final product. Production costs average 6% of the price of a litre.

After processing, the finished product goes to the gas station. And this is another cost item. Retail sales expenses include the acquisition of a site for the construction of a gas station, construction work, including the construction of roads. Next, you need to hire staff and pay for the maintenance of the outlet. This article in the cost of gasoline is about 11%.

Considering the cost of gasoline in Russia, you need to pay attention to one more cost item. Throughout the chain of production and delivery of fuel to the consumer, each organization requires profit. The organization independently lays its level in the cost. This is necessary so as not to go negative. This figure is about 23.3%.

Sometimes the whole process, from production to sale to the end user, is carried out by one manufacturer, for example, Rosneft. But more often, each stage is carried out by a separate enterprise.

Taxes

According to official data, 49% of the cost of gasoline production is taxes. Each business involved in the gasoline manufacturing process pays a fee that is the following amount of the price:

• Income tax - 4.8%.
• Excise - 12%.
• VAT – 15.3%.
• MET – 16.9%.

In fact, the cost of oil affects only 1/3 of the cost of a liter of gasoline in Russia. The price is based on taxes. Moreover, 49% is their minimum number. Depending on the production technology and other nuances, this figure may be higher. According to some reports, taxes reach 73-74% of the total price. They can be distributed as follows:

• MET – 38.1%.
• Excise - 19, 16%.
• VAT – 16.54%.

To date, the industry has developed a situation where gas stations cannot pay for themselves. In 2018, the number of unprofitable filling stations increased. But the companies themselves, which are engaged in the extraction, processing and transportation of oil, have much less influence on the price of a liter of fuel. Taxes explain the high cost.

It is also affected by certain aspects of the industry's export policy. Oil and gas companies are the main source of the budget. If demand for fuel and other refined products falls, the government pursues a policy of compensating for the missing amount. For this, excise taxes are increased. As a result, the retail price of gasoline is rising.

But the opposite is also worth noting. If demand starts to grow, paradoxically, the price also increases. It becomes profitable for the company to export oil, so tariffs on the domestic market begin to rise. The quantity of goods is reduced.

What affects retail prices?

The real cost of gasoline may be affected by seasonal fluctuations in demand. So, according to expert analysts, in the seasonmass vacations, the need for fuel increases significantly. In the summer, companies literally do not have time to produce enough gasoline. As demand grows, the market price also increases.

But not only such fluctuations can affect the cost. The political situation in the country, export policy and many other factors affect pricing.

One of the rather large cost items is the maintenance of gas stations. The fact is that today there are a huge number of them. The supply is increasing, but the costs of enterprises for servicing retail outlets are also increasing. This cannot but affect the price. The more gas stations a company has, the higher the final cost. To understand why there is such a trend, you need to consider the main nuances of the content of gas stations. So, considering what the cost of 1 liter of gasoline consists of, it is worth noting that this may include:

• The cost of the site on which the gas station is built. Finding a suitable place in the city is quite difficult. At the same time, the cost of such a plot is sometimes very high.
• Further, a range of construction work is being carried out, the equipment of the station is in accordance with all the rules. This is a fire and explosion hazardous object, therefore, high requirements are placed on the development of the project, the construction of the complex. This increases the cost of construction work.
• The process of gasoline transportation is being organized. The farther the gas station is from the refinery, the higher the cost of fuel.
• Salariesstaff. Gas station employees receive more than just monthly pay for their work. The company accrues social benefits, pays for holidays, sick days, etc.

Since there are practically no fixed costs for the construction and operation of a new gas station, it can be argued that the more gas stations in the city, the higher the cost of gasoline.

Why is petrol cheaper in Venezuela?

Considering the cost of gasoline in our country, the question of such a low cost of fuel in the domestic market of Venezuela reasonably arises. Why is the price unbelievably low here?

It is worth noting that Venezuela is the world's largest oil exporter. But the main reason for the low cost is the availability of state subsidies. The state provides support to oil companies, which is about $12 million. These funds are used to pay for fuel purchased domestically. Therefore, a liter of gasoline in Venezuela is cheaper than a liter of water.

Fuel prices in Venezuela have been stable for the past 17 years. A gradual rise in prices can only provoke economic instability here.

If we consider the cost of 95 gasoline in Russia, it can be noted that about 60% of taxes on its cost are paid by the consumer. At the same time, the amount of fees charged from the refinery is 20-30%.

In countries such as the UAE and Venezuela, support is provided specifically to the buyer. For this, funds are allocated from the state budget. At the same time, oil refining and oil producing companies pay 70% of this tax. This is the difference in such pricing. Support for manufacturers is provided in Russia. But at the same time, the state does not stimulate domestic demand.

Comparison with US market

The cost of a liter of gasoline in the US market is formed according to other laws. The cost of fuel in this country is close to the level of our country, but salaries are higher here. This is due to a number of reasons. It is worth noting that in this country the method of direct distillation is practically not used. Using new, more advanced technologies, it is possible to obtain 3 times more gasoline in the process of processing a unit of raw materials.

The US gas tax is 30-40%, which is not comparable to our level of 50-65% or even higher.

The cost here also depends on the city. But in general, buyers buy gasoline quite often at local gas stations. In large cities, they are noticeably less. This allows you to reduce the cost of buying or renting a site for the construction of a gas station. Bright advertising attracts buyers. They mostly fill up their cars at these outlets.

To stabilize the situation in our country, the government was forced to reduce the amount of excise tax. This did not lead to lower retail prices. But their growth was still h alted. Thus, during the election period, the rise in prices was artificially suspended. This has led to the fact that many gas stations began to operate at a loss. As soon as the elections were over, such organizations were forced to raise the cost, asnow they had to recoup their costs.

The current structure of the pricing system

The cost of gasoline includes, as before, tax. Oil refineries pay it twice. First you need to pay for each ton of raw materials at a fixed rate of tax on mining. Further, the vast majority of companies export oil to European countries. Therefore, they also pay export duties. When transporting oil, it is 30%.

It is profitable to sell raw materials to European countries, as here they are ready to pay more than consumers in the domestic market. In Russia, exactly as much fuel is sold as needed to meet the minimum demand for this product. The foreign market remains invariably a priority. Moreover, both oil and finished fuel are exported here. The cost of gasoline supplied to Europe is 7-9 thousand rubles. In the domestic market, the price is lower.

It is worth noting that sometimes price increases are formed due to natural causes. For example, with a decrease in fuel supplies to the domestic market, there is a shortage of fuel. This gives sellers the right to raise prices.

Tax maneuver

Considering how the cost of gasoline is formed, one can understand the complexity of the situation in the country. To normalize the situation in the domestic market, it is planned to carry out the so-called tax maneuver. Between 2019 and 2024 gradually, in several stages, duties on oil exports will be abolished. Atthis will increase the NDPI. This will eliminate such a negative phenomenon as double taxation. Producers will transfer to the budget a single fee from the extracted raw materials.

This approach will allow you to receive a single tax by managing incoming flows. Those products that oilmen transport to the domestic market will be subsidized. Gradually, the optimization process in the oil industry was started back in 2015. At this time, the NDPI was increased. However, now it is necessary to logically complete the transformation, which is planned to be done in the next 5 years.

Now for the management and distribution of flows in the oil refining industry will be a "floating excise tax". It must compensate for the difference between export and domestic prices. At the moment, the difference between them is significant. It is about 8 thousand rubles. per ton of raw materials.

The proposed scheme is able to compensate for the difference of only 3 thousand rubles. It is proposed to compensate only up to 1.5 thousand rubles. cost. If the same price difference persists, it will be unprofitable for producers to supply products to the domestic market.

Excise tax

Most of the cost of gasoline is excise tax. Since the rise in prices had to be urgently suspended, this tax was temporarily reduced. This situation will only continue until the end of 2018. Further increase in excises is planned. This will lead to a further increase in gasoline prices. However, the government claims that the cost will remain the same. At the same time, oil refineries will be required to leave the price at the level of 2018.

Fordefiance is planned to raise the export duty to 90%, despite the developed program for its abolition by the end of 2024. Therefore, in conditions of complete uncertainty, “freezing” prices at the same level becomes an almost impossible task. We can only expect an increase in the cost of fuel in the domestic market.