Analysts named obstacles to opening network gas stations in Dagestan

The entry of network gas stations into the Dagestan market is hindered by the resistance of the local fuel lobby, expensive logistics, and the costs of companies operating completely legally, indicated the economist and journalist interviewed by "Caucasian Knot."

As reported by "Caucasian Knot", the head of Dagestan Fedor Shchukin stated the need to accelerate the opening of network gas stations in the republic to enhance competition and reduce fuel prices. According to him, the first "Tatneft" gas station started operating in Dagestan in a pilot mode by October 30. Dagestani drivers expressed hope for improved gasoline quality and lower fuel prices with the launch of network gas stations.

Gasoline prices in Dagestan have relatively stabilized, but they remain high compared to other regions in southern Russia, said an entrepreneur from Makhachkala Murat to the correspondent of "Caucasian Knot."

"The average price of AI-92 is 100-110 rubles per liter, AI-95 is 115-125 rubles," he said. Refueling in neighboring regions where fuel is cheaper is economically unfeasible due to the significant distance, noted the driver.

One or two "Tatneft" gas stations will not solve the gasoline price problem in Dagestan: a full-fledged network of gas stations from vertically oriented companies with their own refineries is needed, but even then, logistics will affect gasoline prices, as Dagestan is the most remote region from refineries in southern Russia, explained "Caucasian Knot" by a lecturer at one of Makhachkala's universities, candidate of economic sciences Magomed Gadzhiev.

"Direct supply from the refineries of vertically integrated companies eliminates part of the intermediary markup and reduces the risk of shipment disruptions. Their advantage is also that in Dagestan, the overwhelming majority of gas stations – about 800 – are private, and they cannot afford to purchase large batches of fuel. However, it is economically unfeasible for network companies to sell gasoline in Dagestan cheaper than in other regions due to high logistics costs. Considering the railway tariff for fuel delivery and storage, the markup on wholesale prices from refineries can range from 5 to 8 rubles per liter. The nearest large refineries are located in Volgograd, Saratov, and Astrakhan. Of course, prices at network gas stations will be lower than at many local operators, but significant price reductions should not be expected," he believes.

The expert noted that federal gas station networks operate completely legally, which also affects the final cost of fuel. According to him, almost all private gas stations operating in Dagestan use various schemes to evade taxes, and employees are not officially registered, which smooths out various costs, – and nevertheless, gasoline prices in Dagestan remain the highest in southern Russia.

In neighboring regions of Dagestan in the North Caucasus Federal District, gas stations of vertically oriented companies operate. According to Gadzhiev, this creates a segment of cheaper and "branded" fuel, but does not form a market, as there are not enough such gas stations for full competition.

The head of Dagestan, Shchukin, is capable of overcoming the resistance of the local lobby and achieving the arrival of federal network gas stations in the republic, stated a Dagestani journalist who wished to remain anonymous to the correspondent of "Caucasian Knot." At the same time, he noted that the issue must always be kept under control, as the resistance will be prolonged and has a systemic nature in places.

"The local refueling lobby is no longer just a circle of businessmen engaged in the sale of petroleum products. Essentially, it is a cartel with good connections, including family ties, in law enforcement and judicial bodies, supervisory authorities, local self-government, and parliament. There have been cases where gas station operators who did not want to agree on prices with them received threats of physical violence. Therefore, it should be understood that this will not be easy. But once a political decision is made, networks will enter the region. It is desirable that there are several different ones for normal competition both among networks and with local gas stations," the journalist believes.

He added that vertically oriented companies with their own refineries that produce gasoline will be able to sell it in Dagestan cheaper even considering transportation costs.

"Almost all republics in the North Caucasus Federal District have network operators, – and fuel there, even considering possible difficulties related to queues and limited working hours of gas stations, is several times cheaper than at ordinary gas stations. This is already an established and well-known practice. And this greatly eases the life of the local population, allowing them to refuel their vehicles at an acceptable price," the journalist said.