On April 14, the fluorite commodity index was 99.47, unchanged from yesterday, down 21.98% from the peak of 127.49 points in the cycle (2019-01-03), and up 102.13% from the low of 49.21 points on December 18, 2016. (Note: Period refers to 2011-09-01 to date)

According to statistics, the domestic fluorite price trend is temporarily stable, the average domestic fluorite price is 2835 yuan/ton as of the 15th day. Recently, the domestic fluorite plant started normally, the mine and flotation plant started normally, the fluorite supply is normal, the recent downstream market is not good, the market demand for fluorite is weakening, and the fluorite market price trend is slightly lower. In recent years, the downstream units started to work poorly, the fluorite spot supply in the field was normal, and the downstream terminal receipt was not good, which led to a slight decline in market price trend. As of the 15th, the price of 97 fluorite wet powder in Inner Mongolia is 2700-3100 yuan/ton, the mainstream of 97 fluorite wet powder in Fujian is 2600-3000 yuan/ton, the price of 97 fluorite wet powder in Henan is 2600-3000 yuan/ton, and the price of 97 fluorite wet powder in Jiangxi is 2700-3100 yuan/ton. The price of fluorite has slightly declined.

The price trend of hydrofluoric acid in the downstream of fluorite is temporarily stable. The domestic market price of hydrofluoric acid is 10,100 yuan/ton as of the 15th day. The weak market price of hydrofluoric acid has a negative impact on the upstream fluorite market. Recent downstream refrigerant products start at a low level, the upstream fluorite and hydrofluoric acid demand is general, the recent downstream refrigerant trading market is general, hydrofluoric acid products prices slightly lower. Recent downstream refrigerant market transactions are cool, R22 refrigerant facility starts at 60%, R22 market facility start-up rate is temporarily stable, the main manufacturer of bulk water factory offer price is between 18,000-19,000 yuan/ton, but the manufacturer does not have bulk water spot, mainly a small number of cylinders shipped. In addition, the actual demand side of the market has not changed much, and the delivery market has increased. Domestic market price trend of R134a shocks, production enterprises equipment start-up rate remains low, refrigerant market demand is general, manufacturers mainly export. But the on-site transaction price does not change much. Businessmen buy on demand. Generally speaking, the downstream industry is in a general market. In addition, the fluorite market supply is normal and the price of fluorite is declining. Chen Ling, an analyst of business associations, believes that the price of fluorite market may be slightly lower.

Driven by many good news, international oil prices have recently shown a significant upward trend. By the end of the 10-day session, the price of light crude oil futures for May delivery on the New York Mercantile Exchange had risen by $0.63 to $64.61 a barrel, or 0.98 per cent. London Brent crude oil futures for June delivery rose $1.12, or 1.59%, to $71.73 a barrel.

Venezuela told the Organization of Petroleum Exporting Countries (OPEC) that its oil production fell to a long-term low last month due to sanctions and blackouts from the United States, Reuters reported. This strengthens the impact of global production restrictions and further tightens supply. Venezuela’s oil production in March was 960,000 barrels a day, down nearly 500,000 barrels a day from February, OPEC said in a monthly report released on October.

Others point out that as the Libyan conflict escalates, there are concerns that oil supplies from the oil-rich North African country will be disrupted and oil prices will gradually rise. The Financial Times quoted an analyst at the Australian and New Zealand Bank as saying that the risks facing crude oil supply were increasing, and that although the current battle was not near Libya’s main oil fields, “the risk of the battle spreading to the whole country is increasing.”

In addition, data released by the U.S. Energy Information Agency on the 10th showed that U.S. crude oil inventories had increased by about 7 million barrels in the previous week to a 17-month high, but gasoline inventories had fallen the most since September 2017, thus failing to improve market concerns about oil supply.

OPEC, Russia and other non-OPEC members agreed in December last year to cut production by 1.2 million barrels a day from January 1 this year. OPEC’s share of output cuts is 800,000 barrels a day, to be completed by 11 member countries outside Iran, Libya and Venezuela. A survey found that 11 OPEC member states bound by the new agreement had a production reduction rate of 135% in March, up from 101% in February.

At present, the international crude oil market is focusing on the meeting of major crude oil producers from June 25 to 26. Russian representative Dmitriyev has said that Russia hopes to increase production when it meets with OPEC in June due to improved market conditions and declining inventories. On the other hand, Emirates Energy Minister Mazruyi said on the 10th that Russia adheres to the oil production reduction agreement with OPEC and will not increase production unless it coordinates with OPEC. It is noteworthy that Saudi Arabia and its Gulf allies are trying to push ahead with larger production cuts than the latest OPEC agreement, despite pressure from President Trump to increase oil supply. Statistics show that Saudi Arabia, OPEC’s largest oil producer, saw the biggest drop in oil supply, with output in March down by 220,000 barrels compared with February.

Data show that in the first quarter of this year, the international oil price has refreshed its biggest single-quarter rise in nearly 10 years. Among the benchmark oil prices in New York and London, West Texas light crude oil futures prices, which rose the most rapidly in the New York market for three consecutive months, led to a cumulative rise of more than 31% in the first quarter, refreshing the biggest single-quarter rise since the second quarter of 2009; Brent crude oil futures prices in the North Sea of the United Kingdom rose 25% in the same period, also the biggest single-quarter rise in nearly 10 years.

In mid-April, fertile cities around the country had a strong atmosphere in the spring. With the gradual start of the terminal market, the overall trading situation was still acceptable, especially in the northern region. Although the early partial market progress lagged slightly, it has also improved in recent days. The spring market has not yet finished, and the summer market has started. So far, some enterprises have introduced the temporary price and policy of summer fertilizer, and collect money for some customers.

It is gratifying that the market situation of high nitrogen corn fertilizer is relatively ideal, and the price is at a higher level in the same period of previous years. In addition to demand pull, the support of raw material market is indispensable, but recently local urea prices began to fall. Influenced by supply increment, imported urea arrival and high prices in the downstream, domestic urea prices may continue to decline slightly in the short term. In this way, there is a lot of suspense about the future market of fertilizer in summer. The author believes that, despite the impact of raw materials, since the summer fertilizer market has been opened with a high profile, it may remain stable for some time.

Firstly, enterprises have begun to harvest fertilizer in summer. As mentioned above, part of the summer fertilizer market has started. Some enterprises aim at the opportunity of urea soaring. They have issued quotations and policies to collect money. In order to avoid the price of high nitrogen fertilizer rising further with the urea market, some distributors have to pay a proper amount of money to stock up. Once the price of urea falls, the market pessimism will increase, so the price of high nitrogen fertilizer also has the risk of falling, but considering that some customers have been pre-harvested at relatively high prices in the earlier period, enterprises will not easily cut fertilizer prices substantially, in order to cater to the subsequent fertilizer preparation psychology downstream, preferential policies may be narrowed or cancelled.

Secondly, there is a large surplus space for fertilizer demand in summer. Generally speaking, the northern field crops are planted in a wide range of areas, and the fertilizer market is relatively more active in spring. However, during the summer, most of the areas are planted with maize and rice, and the demand for fertilizer can be imagined. At present, only part of the corn fertilizer market has a slight trend, and the downstream caution still exists, mainly due to the unknown future market of raw materials and the long-term use of fertilizer. With the clarity of the market and the promotion of time, the terminal demand will be released. Therefore, in the case of weakening raw material prices, the overall market may advance slowly in the short term, but in the long run, it is still possible.

Finally, local environmental safety monitoring pressure will persist. A series of topics, such as environmental protection and safety, must have been well known to everyone. The original situation has been more severe. Unexpectedly, the serious accident of explosion of Yancheng Chemical Plant in Jiangsu Province has been aggravated again recently, and unprecedented production safety inspection has been carried out in some areas. Although the normal production of most fertilizer enterprises is not a big obstacle, it inevitably results in partial phased shutdown and production restriction. Spring and summer markets almost uninterrupted convergence, waiting for release of demand or will lead to a partial time of tight situation, then the summer fertilizer market heat will rise.

Generally speaking, although the anticipated decline in urea price will inevitably affect the compound fertilizer market in spring and summer, or delay the progress or fall the price, based on the current situation and the forecast of the development at both ends of supply and demand, the fertilizer market will remain stable in summer.

Since the beginning of the year, the spot price of methanol has risen first and then fallen. Among them, the prices in eastern and southern China are similar to those in the beginning of the year. Although prices in Shaanxi, Inner Mongolia, Henan and Hebei declined in late March, they increased by about 200 yuan/ton compared with the beginning of the year. Investigate its reason, the mainland enters the spring maintenance period, many enterprises centralized maintenance leads to the reduction of supply, the price of the mainland is easy to rise and difficult to fall, while East and South China are affected by both domestic and foreign markets, the increase of import to port, the entry of foreign equipment into the maintenance period, the continued increase of port inventory and the non-sustainability of depot drainage are the factors in turn. The prices of East and South China are in the same order. After the rebound, there was a more obvious drop. In the future, methanol prices are expected to show an inverted V-shaped trend.

Maintenance landing and demand recovery

At the end of March and the beginning of April, the Mainland manufacturers such as Inner Mongolia and Shaanxi came to the ground for spring overhaul. The market was in a state of supply reduction, and the willingness of the Mainland manufacturers to bid rose. However, due to the relatively high inventory level of Northwest manufacturers in March and the obvious price increase since the beginning of the year, it is expected that under the stimulation of the new round of maintenance, the price increase will be limited, or less than the increase since the end of the year. Compared with East China, Mainland prices are more resilient.

On the demand side, starting in mid-late March, offshore olefin enterprises such as Shenghong in Jiangsu, Xingxing in Zhejiang and Huisheng in Nanjing all restored to normal levels, which accelerated the procurement of methanol and the actual consumption of coastal stocks. In addition, the safety inspection of formaldehyde and other downstream areas may affect the procurement demand in the short term, but in the medium and long term, the impact is not significant, and the traditional demand still plays a leading role in methanol consumption.

Slow Deposit Speed in Port

Up to now, the total inventory of methanol in eastern and southern ports of China is 10.971 million tons, which is at an absolute high level in the past five years. According to Zhuo Chuang’s statistics, after the depot was discharged on March 21, the total stock of the port dropped again by a small margin of 0.74 million tons on March 28.

Iran’s 3 methanol plants with 5.6 million tons per year failed to restart in March. In addition, South America has always been an important source of methanol imports in China. In the competition between the United States and Russia, the United States sanctions against Venezuela in South America led to the blockage of cargo shipments in the region. The above factors will cause the decrease of methanol import in April.

Nevertheless, the continuity of depot disposal is doubtful, and the absolute high level of inventory leads to the weakening of market mentality. From the point of view of port stocks of other liquid chemicals, it is also at an absolute high level in the past six years. Therefore, the overall price of liquid chemicals including methanol is under pressure. Price rebound is only a short time before demand continues to grow.

By the end of April 2, methanol futures hedging was net hedging, with a holding capacity of 72770 tons. The net hedging volume of methanol September contract increased, and the seller’s hedging position was obvious. It can be seen from this that the seller’s hedging is in the main position. This situation occurred in January when the base spread continued to weaken, and there was no risk arbitrage space in part of the time, which made some manufacturers and traders participate in the base trade, lock in a large number of spot arbitrage positions, resulting in some inventory consolidation. Stocks locked in futures arbitrage are gradually released on the May contract of methanol futures, and the market will be impacted by the withdrawal of futures arbitrage or the start of delivery.

On the whole, the methanol disk is in a wide oscillation period for the time being, and the trend market needs the cooperation of key issues

In the fourth quarter of 2018, due to abundant supply and weak demand, the supply and demand pattern of polypropylene market was seriously unbalanced and prices continued to weaken. Since the end of the year, with the gradual rise of international crude oil prices, the cost focus of polypropylene has been shifting upwards, and the price has risen accordingly. However, as the problem of oversupply has not been alleviated, the trend of polypropylene is obviously weaker than other chemical products.

Strong cost support

The sustained rise in crude oil prices is the main reason for this round of polypropylene price rebound. According to OPEC’s monthly report in March, the global crude oil demand in the first quarter is 99.02 million barrels/day and the supply is 99.03 million barrels/day (of which, in March, OPEC’s output is 30.4 million barrels/day, non-OPEC’s output is 63.59 million barrels/day, OPEC’s LPG and unconventional oil and gas supply is 5.4 million barrels/day). There is only 10,000 barrels/day surplus in the global market, and the supply and demand basically reach a

Saudi Arabia and Russia are resolute in reducing production and raising prices; Venezuela’s crude oil production is expected to decline further due to the turbulent domestic situation and Iran’s further sanctions imposed by the United States; the number of active drilling wells in the United States is continuously decreasing, and it is difficult for production to rise in the short term. Later, the international crude oil supply will shrink further, the market will develop from oversupply to shortage, and the price of crude oil is likely to rise further.

Fundamentals remain weak

On the supply side, at present, the start-up load of polypropylene production enterprises in China is 88.33%, which is 1.43% lower than the previous statistical period. Among them, Sinopec Yangtze Petrochemical plant started, while Hunan Changsheng plant stopped; PetroChina Dalian organic new plant stopped. In early April, Dalian Organic and Zhejiang Hongji’s plant is expected to start up and domestic supply will increase. Incrementally, Jiutai’s MTO device is in the test run stage, and the product is expected to be launched in May.

In terms of stocks, the petrochemical stocks of polypropylene have declined. However, the previous inventory is not digested by the terminal, but transferred to traders and downstream enterprises. Therefore, although Petrochemical stocks have declined, because of the backlog of downstream stocks, downstream enterprises are not willing to take goods, more are just in need of purchasing, and the bargaining power of petrochemical enterprises has not improved.

In terms of demand, downstream start-up load is relatively stable. Among them, the start-up load of plastic knitting enterprises is 67%, the start-up load of copolymer injection molding enterprises is 65%, and the start-up load of BOPP enterprises is 56.8%. Later, the household appliances industry is about to enter the peak consumption season, and the demand for copolymer injection moulding is expected to increase, which forms a certain support for the price of polypropylene.

Forecast for future market

In summary, the previous rise in polypropylene prices was largely driven by rising costs. At present, the global crude oil supply and demand pattern is changing from tight balance to supply shortage. The momentum of price rise is sufficient, and the cost-side support for polypropylene is obvious. However, on its own fundamentals, supply is relatively abundant, and terminal demand shows no obvious signs of warming up. Although Petrochemical inventories have declined, they are only transferred downstream and not digested by the terminal. In this case, the rise of polypropylene price should be treated as a temporary rebound. The rebound height of polypropylene depends on the increase of crude oil price. Operationally, the suggestions are mainly short.

1.Price Trend

According to the monitoring data of business associations, as of April 3, the average price of domestic cyclohexanone market was 9,433 yuan/ton, and the domestic market of cyclohexanone rose slightly.

II. Market Analysis

Products: Cyclohexanone market has increased slightly, the purchasing situation of downstream chemical fiber factories is still acceptable, some factories have increased their quotations, the market has reduced the supply of low prices, and the solvent market has just needed to purchase. The mainstream offer of cyclohexanone in North China market is sent in cash from 9400 to 9600, the mainstream offer in East China market is sent in cash from 9700 to 9900, and the mainstream offer in South China market is sent in cash from 11000 to 10300.

Industry Chain: Pure Benzene: Driven by the rising stock market and commodities, East China’s offer rose, but the buying did not follow up. Spot buy 4300 yuan/ton, offer 4500-4550 yuan/ton, April 4350-4600 yuan/ton, May 4450-4600 yuan/ton. Caprolactam: Caprolactam liquid market trend is strong, spot supply is tight, manufacturers are reluctant to sell at low prices, low-end prices continue to decrease, the procurement atmosphere of the polymerization plant is still acceptable, and the field mentality preference. The liquid spot price of caprolactam is delivered at 14100-14300 yuan/ton acceptance. On the solid side, due to the rising price of liquids, part of the solid side sells at a low price. The price refers to 14500-14700 yuan/ton, which is remitted to us now. The price of the northern part is slightly lower.

3. Future Market Forecast

The cost surface is relatively stable. The export volume of cyclohexanone in the market fluctuates little with the adjustment of the start-up of chemical fiber plant. Cyclohexanone analysts, business associations, predict that short-term cyclohexanone market stabilization is the main adjustment.

Price Trend

The domestic dimethyl ether market fluctuated upward in March. At the beginning of the month, the average domestic dimethyl ether market price was 3176.67 yuan/ton, and at the end of the month, the average price was 3380 yuan/ton. The monthly increase was 6.4%, and the price fell 19.82% compared with the same period last year.

II. Market Analysis

Products: Dimethyl ether market surged in February. The atmosphere of market transaction is general. As of March 29, Yutai of Hebei Province has no quotation for parking, while Shengxin Biotechnology Co., Ltd. of Qinyang City has no quotation for dimethyl ether. The ex-factory price of dimethyl ether in Henan Lankao Huitong Chemical Co., Ltd. is 3370 yuan/ton, Henan Yima Xinyuan dimethyl ether ex-factory price is 3410 yuan/ton, Hebei Jichun Chemical Co., Ltd. is 3550 yuan/ton, Shandong Dezhou Shengdeyuan Co., Ltd. is 3500 yuan/ton, Shanxi Orchid Science and Technology Venture Co., Ltd. is 3250 yuan/ton.

Industry chain: March domestic methanol market volatility. According to the price monitoring of business associations, the price of methanol was 2438 yuan/ton at the beginning of the month and 2378 yuan/ton at the end of the month. The price of methanol fell by 2.46% in the month, 12.89% compared with the same period last year. In March, domestic liquefied petroleum gas market prices first restrained and then increased, and overall downward trend. At the beginning of the month, the average price of domestic liquefied gas market was 4100 yuan/ton, and at the end of the month, it was 3996.67 yuan/ton. The price fell by 2.52% in the month and increased by 10.21% compared with the same period last year. In April, Saudi Arabia’s Amy CP: Propane 515 US dollars per ton, up 25% from last month. Butane is 535 dollars/ton, up 15% from last month.

At the beginning of this month, some factories parked and repaired, and the market supply was reduced. In addition, the trend of cost methanol was strong, and the market mentality was good. The downstream market actively joined the WTO to replenish the goods. The factories shipped smoothly, the inventory was not pressurized, the mentality was strong, and the price went up sharply. However, the liquefied petroleum gas market continued to be depressed in the later period, which affected the market mentality. In addition, with the completion of a new round of replenishment in the downstream market, many factories have withdrawn from the market to consume inventory. Some factories have restarted their equipment, the market supply has increased, and prices have oscillated and fallen. At the end of the month, manufacturers’profits hang upside down, with a strong exploratory mentality supported by low-warehouse, coupled with the rise of CPs in April, which boosted the market mentality, and prices rebounded slightly.

Industry: According to the price monitoring of business associations, in March 2019, there were 7 kinds of commodities rising annually in the energy sector, including 2 kinds of commodities with an increase of more than 5%, accounting for 12.5% of the monitored commodities in the sector; the top three commodities were petroleum coke (7.60%), dimethyl ether (6.40%) and asphalt (3.68%). There are 9 kinds of commodities falling annually, and 2 kinds of commodities falling by more than 5% accounted for 12.5% of the monitored commodities in this sector. The products of the first three declines were liquefied natural gas (-12.87%), coke (-9.73%) and MTBE (-4.09%). This month’s average rise and fall was -0.61%.

3. Future Market Forecast

Dimethyl ether business analysts believe that: at present in the off-season, the market demand is insufficient. But in April, CPs rose, liquefied petroleum gas trend or strong upward, boosting the market. The dimethyl ether Market is expected to rise slightly in the short term.

The PX commodity index on March 31 was 64.80, unchanged from yesterday, down 36.72% from the peak of 102.40 points in the cycle (2013-02-28), and up 42.26% from the low of 45.55 points on February 15, 2016. (Note: Period refers to 2013-02-01 to date).

Recently, the domestic market price trend of p-xylene has been temporarily stable. Pengzhou Petrochemical Plant has been running steadily in the field. Urumqi Petrochemical Plant has started 50% of its operation. Fuhai Aromatic Hydrocarbon Plant has started a line. CNOOC Huizhou Refinery and Chemical Plant has been overhauled. Hengli Petrochemical PX Plant has been put into operation. Other units have been running steadily for the time being. Due to the increase of domestic market supply of p-xylene, the market for p-xylene has increased. Prices are declining. The opening rate of PX plant in Asia is about 80%. On March 29, the closing price of p-xylene in Asia increased by 5 US dollars per ton. The closing price is US$1029-1031 per ton FOB Korea and US$1048-1050 per ton CFR in China. More than 50% of the domestic units need to be imported. The fluctuation of foreign prices has a negative impact on the domestic market price of p-xylene. The intra market price of p-xylene maintains temporary stability.

On March 29, the price of WTI crude oil in May rose to $60.14 per barrel, an increase of $0.84. Brent crude oil in May rose to $68.39 per barrel, an increase of $0.57. The trend of crude oil price rose slightly, which had little impact on the price of downstream petrochemical products and had a stable trend in the price of xylene market. Recent textile industry market shocks, PTA price 1 day trend shocks, the average price of East China bid in the vicinity of 6600-6750 yuan/ton, as of 1 day domestic PTA start-up rate is about 75%, polyester industry start-up rate is about 90%, downstream production and sales rate slightly increased, but PTA market price changes little, it is expected that PX market prices will remain stable in the later period.

Summary: After abolishing export tariffs, the cost advantages of Russian crude oil and oil products in the international market will be more obvious, which will help to enhance Russia’s influence in the oil market.

The Russian government passed two decrees in July and August 2018 to reform the tax and fee of its oil industry. The general principle is to reduce the export tax on crude oil and petroleum products year by year until it is abolished, while raising the oil exploitation tax equally. Although the tax reform will raise the price of Russian domestic refined oil in the short term, and the new tax rebate system and dumping coefficient will make its oil tax and fee system more complex, in the long run, the new tax system will help to improve government revenue and the competitiveness of Russian oil in the international market, as well as promote the upgrading of its domestic refining industry, whether to the Russian government or to the Russian government. For the oil industry, the advantages outweigh the disadvantages.

The abolition of export tariffs is not a temporary phenomenon

The abolition of export tariffs on crude oil and petroleum products is not a temporary rise in Russia. It tried in the mid-1990s, but the subsequent financial crisis forced it to give up. Since then, Putin has repeatedly asked relevant departments to study the abolition of tariff measures on crude oil and oil exports, and when the plan took shape, it caught up with the sharp fall in oil prices in the second half of 2014 and was postponed again. However, with the implementation of joint production reduction, international oil prices began to recover as a whole since the beginning of 2017. The financial situation of the Russian government and oil companies has greatly improved, which provides an opportunity for tax reform. In addition, from the direction and content of the adjustment, this is not an independent adjustment. It continues the basic principles and direction of the adjustment of oil tax policy from 2015 to 2017, formulates supplementary and solutions to the unresolved problems of the last adjustment, and finally forms a relatively complete tax reform plan.

The main contents of the Russian oil tax policy adjustment from 2015 to 2017 are to reduce the export tax rate, increase the exploitation tax rate, keep the profit level of upstream oil companies basically stable, postpone the time of raising the export tariff of petroleum products to the export tariff level of crude oil from the original plan of 2015 to 2017, and provide enough time for refineries to complete the modernization of equipment. Avoid a shortage of gasoline or a sharp rise in oil prices at home. Another important background of the reform at that time was that in 2015, when Russia, Kazakhstan and Belarus established the Eurasian Economic Union, the tax revenue of the government would inevitably decrease due to the duty-free imports within the Union. In order to maintain the level of federal tax revenue, additional tax revenue should be considered. Oil tax, as the main source of budget revenue of the Russian Federation, naturally became the government revenue. The preferred target for line adjustment.

However, the Russian government believes that the reform in the oil and gas field from 2015 to 2017 is not thorough enough, and some problems have not been fundamentally solved. First, Belarus and Kazakhstan imported crude oil from Russia, resulting in tariff losses on Russian crude oil exports. For a long time, for different purposes, Belarus and Kazakhstan have been importing crude oil from Russia, especially Belarus, whose annual refining volume greatly exceeds consumption (e.g., 20 million tons of refining oil in Belarus in 2014 and 7.5 million tons of consumption). All remaining oil and gas products are exported, equivalent to low tariffs from Russia (before the establishment of Eurasian Economic Union) or zero tariffs (Eurasian-Asian Economic Union). After the establishment of the alliance, the government of Belarus and Kazakhstan gained additional tariff revenue by importing crude oil and exporting high value-added petrochemical products after domestic refining, while Russia suffered tariff losses. Secondly, the difference in export tax rates of crude oil and petrochemical products causes the problem, which is essentially equivalent to the subsidies provided by the Russian government to refineries. In the past, the export tariff on petrochemical products was lower (66% of the export tariff on crude oil after October 2011), while the export tariff on crude oil was heavier. After purchasing crude oil, refineries exported to the international market after paying less tariff after primary refining processing, so that they could obtain considerable profits. Therefore, refineries generally lack enthusiasm to carry out products. Deep processing, or investment in modernized refineries, has resulted in a low proportion of refined products meeting European standards in the Russian market.

The Russian government believes that the fundamental way to solve the above problems is to gradually abolish export tariffs on crude oil and petrochemical products and increase oil and gas exploitation taxes so as to compensate for the decrease in federal tax revenue caused by the reduction (abolition) of export tariffs. This will not only ensure that federal tax revenue does not decrease, but also avoid tariff losses due to the existence of Eurasian Economic Union in the future, but also solve the downstream problem. The issue of export subsidies for enterprises. It is expected that after the gradual abolition of export tariffs, Russian domestic petrochemical products will participate more in international competition. Refineries will take the initiative to improve their technological level, modernize their equipment, produce more high-quality refinery products, and further adjust their petroleum tax policies in 2018.

Tax reform is vigorous

The main contents of Russia’s current oil tax reform include three aspects, namely, reducing export tax on crude oil and oil products year by year, synchronously increasing oil exploitation tax (MET), providing tax preferences and introducing tax rebate system.

In terms of reducing export tax, the new scheme stipulates that from January 1, 2019, constant coefficients will be introduced in the collection of export tax on crude oil and oil products, which will be 0.833 in 2019, and will be reduced year by year from 2020 to 2023, which will be 0.677, 0.5, 0.333 and 0.167, respectively. By 2024, the export tax will be completely abolished. In terms of raising the exploitation tax, a formula for calculating the tax rate of crude oil exploitation is designed considering the factors of crude oil reserves, production, quality, oil price and exchange rate. From January 1, 2019, the tax rate calculated by this formula will be multiplied by the tax rate of constant coefficient, which is 0.167 in 2019, 0.333, 0.5, 0.667, 0.833 in 2020-2023, and 1 in 2024, respectively. The reduction of export tax corresponds.

Since the tax base of exploitation tax is larger than export tax, the implementation of the new tax system will inevitably lead to a rise in the price of crude oil and oil products in Russia, which will have a greater impact on downstream enterprises and consumers. In order to balance the interests of many parties, the Russian government has introduced preferential tax policies for refineries, including refineries in remote areas, refineries investing in upgrading refinery facilities, and the proportion of gasoline with high octane number. High refineries and sanctioned refineries almost cover all refineries in Russia, which are mainly subordinate to companies, to help them mitigate the short-term impact of rising raw material prices. At the same time, tax rebates and dumping coefficients are introduced to reduce the range and fluctuation length of domestic oil prices and the impact of tax and fee reform on the cost of life of end-users.

Positive effects far outweigh negative ones

In view of the important role of oil in Russia’s economic development and diplomacy, the impact of the oil industry tax adjustment on Russia is multifaceted, and from the overall and long-term development perspective, the positive impact far exceeds the negative impact.

First, the new tax system increases government revenue and reduces the financial burden. In the past, crude oil export tax was levied on crude oil for export, which accounted for about half of Russia’s crude oil production, while the object of exploitation tax was all crude oil produced in Russia. Its tax base was bigger than export tax. Therefore, although the increase of exploitation tax rate and the decrease of export tax rate in this reform were the same, the actual tax revenue of the government was increased. . The Deputy Prime Minister of Russia expects that this reform will add 20 to 25 billion US dollars in revenue to the government in the next six years. According to Wood McKinsey’s oil price-based estimates, the new tax plan will provide the Russian government with an additional income of $112 billion between 2019 and 2024. Although the expected data are quite different, the basic understanding is unanimous, that is, the new tax scheme will help increase government revenue and facilitate the implementation of Russia’s “economic recovery plan”. Until 2017, Russia’s oil export tariff has been significantly lower than the crude oil export tariff. It is very important for refineries to extract only domestic crude oil. After extracting light diesel oil and gasoline, they will export the remaining heavy oil as oil products at a lower tariff rate to earn profits. In order to meet the demand of domestic market for oil consumption, the Russian government often needs to subsidize refineries to help them upgrade their technology and equipment. The annual cost is about 15 billion US dollars. After the export tax rates of crude oil and oil products are unified, refineries will take the initiative to upgrade their equipment, and government subsidies will be greatly reduced.

The second is to improve the competitiveness of Russian oil and oil products and related companies. The shale oil revolution in the United States is continuing to reshape the global oil market. At present, the oil market is still in a state of oversupply. Peak oil demand is gradually becoming a consensus. The oil market is increasingly developing towards the buyer’s market. Oil producers who used to sit on a few dollars show their ability to compete for the market. Russia is rich in petroleum resources and has lower exploration and development costs than most resource countries. After abolishing export tariffs, the cost advantage of Russian crude oil and oil products in the international market will be more obvious, which is conducive to enhancing Russia’s influence in the oil market. In addition, after the tax reform, although the mining tax is more extensive than the export tax, it will lead to an increase in the tax burden of companies engaged in upstream business. However, Russia has changed mineral resources tax to profit tax before, which has helped oil companies reduce part of the tax burden, and the export revenue of crude oil will increase significantly after the abolition of export tax. The overall operating environment of upstream companies will be better. For Russian downstream refineries, after the abolition of oil export tax, these enterprises will participate more in the world oil market, promote the modernization and upgrading of domestic refineries, and improve the overall level of domestic refining industry and enterprise competitiveness.

Third, it has solved the tax losses of Russian oil exports caused by the low tariffs of Eurasian Economic Union. The Eurasian Economic Union consists of six former Soviet Union countries, including Russia, Belarus and Kazakhstan. It is a supranational alliance planned to deepen economic and political cooperation and integration. On January 1, 2019, the tax exemption threshold for products within the alliance has been reduced to 500 euros, and will be further reduced until it is cancelled. The tax losses caused by Russia’s exports of crude oil and oil products to the member countries of the alliance are close to 10 billion US dollars annually. The tax reform has enabled Russia to abide by low or even zero tariffs within the coalition, and to avoid tax losses through source taxation.

Of course, this reform also has a negative impact on Russia. On the one hand, the tax reform has introduced many new calculation formulas and tax measures, making the Russian oil industry tax system more complex. On the other hand, Russia’s new oil tax system has obvious “egoism” color, which may affect Russia’s relations with some trading partners, especially with Belarus, Kazakhstan and other countries. The probability of local disagreements around oil import and export will increase.