Scenarios for Russian petrochemical industry development under sanctions: Forecast of automobile gasoline market based on the Bayesian approach

Abstract

The article examines the impact of sanctions on Russian energy sector from theoretical and practical view point. A review of foreign and Russian literature devoted to the positive impact of sanctions on Russian economy in general and in particular on the sector of interest is made. We have revealed contradictory trends that affect production capacity and prices under sanctions. On the one hand, the reduction of oil refining cost in dollar terms and crude oil price decrease allowed gasoline producers to maintain the level of sales profitability without a significant increase in prices. On the other hand, price increase on the imported equipment and technology and limited access to them complicate the implementation of projects that are aimed to the modernization of oil-refining industry.  Thus, the aim of the study is to forecast the gasoline market on the basis of assessing of scenarios for the development of the petrochemical industry by Russian producers under sanctions. The forecast also considers the probabilities of modernization project implementation at Russia's largest oil refineries. We have developed the following scenarios for petrochemical industry development: import substitution, conservative and stagnated scenarios. They take into account the growth of octane addictive market as well as challenges that large producers face with under sanctions. The tools for production capacity forecast in terms of macroeconomic and geopolitical uncertainty have been developed on the basis of the expert-statistical Bayesian approach. We have developed possible scenarios for petrochemical industry development and forecasted gasoline volume and prices till 2026 considering the expert survey data that was conducted among market participants in 2016. We have determined the opportunities to support petrochemical industry by the public authorities under sanctions: tax measures (tax remissions to support investment demand out of proceeds of shareholders’ interest, due to compensation of the costs associated with this type of expenses, etc.); development of a favorable institutional environment, developed infrastructure, accessible raw materials and technologies. Further the research will be devoted to the assessment of opportunities for the implementation of the tools developed by the authors in other economic sectors of Russia.

Keywords

economic sanctions, import substitution, oil refining industry, gasoline market, scenario forecasting, Bayesian approach, expert survey

For citation

Kapoguzov E.A., Chupin R.I., Kharlamova M.S. Scenarios for Russian petrochemical industry development under sanctions: Forecast of automobile gasoline market based on the Bayesian approach. Perm University Herald. Economy, 2017, vol. 12, no. 3, pp. 421–436. DOI 10.17072/1994-9960-2017-3-421-436

Acknowledgements

The article has been written as a part of the scientific research on the public instruction of the Financial University under the Government of the Russian Federation for 2017 (confirmed by a Deputy Chairman of the Government of the Russian Federation 07.03.2017, no. 1508p-P17). The research is called “Economic sanctions against Russia: ways to reduce loss and to overcome autarchy” (VTK-GZ-23-17).

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