Starting July 1, 2022, the regulated price of Gazprom (MCX:GAZP) gas in Russia will increase by 5% for industrial consumers and by 3% for households. This may automatically affect the gas supply price of independent producers, who sell gas tied to Gazprom’s regulated price, as well as the price of gas on the exchange.

If we recalculate this price in currency, it has risen significantly due to the strengthening of the ruble. Now the price is about $100 per thousand cubic meters. However, it is 10 to 15 times less than spot gas prices in Europe, where industrial enterprises and, first of all, fertilizer production are closing down due to high prices and fuel shortage.

The amount of wholesale price indexation is determined by the Russian Federation’s three-year socio-economic development forecast, which is developed by the Ministry of Economic Development and approved by the government. In the macro forecast of September 2021, the Ministry of Economic Development envisaged indexation of wholesale regulated gas prices for industry by 5% in 2022, 4% in 2023, and 4% in 2024. For the population everything remained the same as before – 3%.

Earlier, Ilya Torosov, First Deputy Head of the Ministry of Economic Development of the Russian Federation, commented in an interview with Interfax that the gas price for industry will also take into account the increased costs of Gazprom for the program of gasification of regions: “The wholesale price for industry and business – indexation by 5% from July 1. The logic of 2020 remains the same – price growth index plus coverage of the gasification program, three plus two makes five”.

With this indexation, the price of gas for industrial consumers of the 56th belt (which includes the Krasnodar, Stavropol and Rostov regions, Adygea, Dagestan, Ingushetia, Kabardino-Balkaria, Karachay-Cherkessia, North Ossetia and the Chechen Republic) will increase from 5155 to 5413 rubles per thousand cubic meters, or $103 at the current exchange rate (for Rostov-on-Don the price is 5409 rubles).

The price of gas in Moscow and Moscow Region will rise to Br5303 ($101), while in St. Petersburg and Leningrad Region – Br5115 ($96). The price of gas in the production regions will rise to RUB 2907 ($55) in YNAO and RUB 3421 ($65) in Khanty-Mansiysk Autonomous Okrug.

However, this is only the wholesale price – it accounts for 80% of the cost of gas for the end consumer, another 15% is the fee for transportation through gas distribution networks, and 5% is the fee for supply and sales services of regional gas companies.

A year ago – on July 1, 2021 – the wholesale regulated gas price for all categories of consumers increased by 3%.