The Russian government and oil companies have agreed to cut wholesale domestic fuel prices as a temporary measure aimed at stemming an unwanted increase in the cost of petrol and diesel, a politically sensitive issue for voters.
Petrol has become more expensive as a global deal to curb oil production led to a rise in the price of crude. Imminent US sanctions against Iran, a large oil producer and exporter, have also lent upward pressure.
As reported by Reuters, Russian authorities are keen to prevent fuel from becoming too costly because previous price spikes angered voters. The government is already taking a series of unpopular measures to raise more revenue for the budget and needs to tread carefully.
Gasoline and diesel retail prices have increased by almost 7% since May, way above annual the inflation rate of around 4% - the level at which the government has promised to cap fuel prices next year.
After meeting with the oil companies, Deputy Prime Minister Dmitry Kozak claimed, “A solution has been found, the situation has started to calm down.” According to the Russian central bank, the cost of gasoline has remained the main factor affecting inflation expectations, followed by the weaker rouble and food prices.