The Effect of Oil Prices Volatility on Prices in The Domestic Market: Empirical Evidence From Russia | ICRES

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The Effect of Oil Prices Volatility on Prices in The Domestic Market: Empirical Evidence From Russia


Assoc. Prof. Dr. Svetlana Balashova, Rudn University, Russia


The dynamics of real prices for crude oil in the domestic market and its dependence on world oil prices is examined. The examined period is 2000- 2020. Rosstat monthly data on oil prices for domestic companies are used. The real prices of oil are obtained by deflating the average purchase prices of crude oil for domestic companies by the CPI. Prices for Brent are utilized as an indicator of world prices for oil, data are retrieved from IEA. The ARDL model estimates show that real domestic oil prices depend on Brent prices and on the volatility of Brent prices. To measure the volatility of Brent prices we utilize the moving standard deviation over a one-year rolling window. Before building the model, checks for unit roots are made. Results. Nominal prices in dollars are strongly related to current word prices although are considerably lower in the domestic market. The difference between the world market price and the local price is mainly export duties. Export duties on oil and petroleum products, in addition to their fiscal function, also perform the function of protecting the domestic market from rising fuel prices. However, the real oil price in the local currency has different dynamics and is less volatile than current dollars prices. Volatility in Brent prices has an additional impact on real domestic prices for crude oil in Russia. Uncertainty in the global oil market causes the uncertainty in revenue flow for the oil-producing companies, which forces them to increase oil prices in the domestic market. Domestic prices dropped sharply in April 2020, but then almost return to pre-pandemic levels although Brent has not. the possible explanation is the increased volatility in the global oil market.


real prices for crude oil, volatility, uncertainty, Russia  


Balashova, S. (2021). The Effect of Oil Prices Volatility on Prices in The Domestic Market: Empirical Evidence From Russia. In M. Shelley, I. Chiang, & O. T. Ozturk (Eds.), Proceedings of ICRES 2021--International Conference on Research in Education and Science (pp. 108-118). Monument, CO, USA: ISTES Organization. Retrieved 26 October 2021 from


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