Terms of Competitive Behavior in the Retail Gasoline Market in the Russian Federation

Abstract

Decline of crude oil prices in the world market did not lead to decrease in gasoline prices in Russia — they still tend to grow. Therefore it is necessary to define factors, which encourage competitive behavior in absence of direct state regulation in Russian gasoline market. The author shows that competitive behavior (which leads to competitive prices) is possible in case of sufficient market power in retail market of gasoline, irrespective of affiliation of the retailer — it can be either independent retailer, or vertically integrated oil company itself. Also it is shown that any quasi-competitive measures are not efficient due to high level of horizontal and vertical concentration in oil industry in Russia. The main limitation of the research is that political environment sometimes distorts results of economic analysis held for oil and gas industry. The results of the research, provided in the article, may become a basis for the guidelines for regulatory bodies and independent retailers in gasoline markets. The article provides original pioneer research with regard to Russian oil industry. The main novelty includes original analysis of different ways to achieve competitive prices in the retail market of petroleum in Russia. The main value of the paper refers to the conclusions concerning general factors, which can influence price level in case of high level of vertical and horizontal concentration in oil industry. It can be of great value for regulatory bodies and independent oil companies in Russian oil industry.