In an effort to help push down prices, Russias antimonopoly agency has been encouraging finished lubricant marketers to trade on the St. Petersburg commodities exchange. Some industry sources doubt the initiative would be effective.
The Federal Antimonopoly Service began sending letters last fall to at least five large lube marketers, recommending they start trading lubricants on the St. Petersburg International Commodity Exchange, daily newspaper Izvestia reported. The list included Shell, Gazpromneft, Lukoil and Rosneft. The latter was reportedly the only company that has expressed intent to go along with the request, although Lube Report did not obtain confirmation by press time.
Some observers chided the idea. Trade of lubricants on the exchange could not be successful, and it cant deregulate the lubricants market in a short term, Nikita Medvedev, senior analyst at the Moscow-based consultancy RPI, told Lube Report Monday.
Unlike crude oils, fuels and other petroleum commodities traded on the exchange, prices for motor oils cannot be standardized, Medvedev continued. Thats because specific formulations and original equipment manufacturers approvals vary widely across the array of products in the category.
Russias motor oil market is vast in terms of product assortment and pricing, explained an industry insider who asked not to be identified. Products meeting the mostly obsolete Gost standards cost significantly less than those certified as meeting American Petroleum Institute specifications, for example.
If a certain motor oil brand comes with a few more OEM approvals, its price can rise by 10 percent, 50 percent or even up to 100 percent compared to a similar product with no such approvals, the source said.
The pundits believed the goal of the antitrust agency is to narrow the wide gap between various motor oil prices. The FAS initiative could result in some volumes of motor oils or even base oils being listed on SPIMEX, Medvedev continued. However, these volumes could be insignificant compared to the overall market. Suppliers would likely continue selling directly to customers, through dealers and under long-term contracts.
The interests of consumers depend on the dealers and international companies who set motor oil prices [based on qualities such as] product approvals in a very competitive market, he continued. The lubricant exchange could work if large and small users flock to the exchange in order to get more favorable margins than they would if they sold through dealers. Exchange trading and broker fees could be much smaller than the dealers [cuts], and this could be favorable to the lubricant producers.
He added that listing prices on an exchange could also be effective for marketers competing with more expensive products.