MOSCOW, October 6 (RIA Novosti) - Igor Artemyev, chief of the Federal Antimonopoly Service, has sent a letter to Prime Minister Mikhail Fradkov describing the current situation on the domestic market of oil and products. The analysis was done by the FAS board for control and supervision of the fuel-energy complex, the FAS press release says.

According to experts, begun in May 2004, the growth of prices on oil products is primarily due to the objective reasons - growth of prices on hydrocarbons on the world markets. At that, "in late August (-early September) the domestic market situation was shaped against the background of the record-high world oil prices", the FAS notes. "The average price on Urals oil in late August-early September was between 36 and 38 dollars per barrel".

The FAS also notes several factors telling of the dynamics of prices on the oil market, where growth is ahead of the consumer price index.

FAS specialists note above all the negative impact of the territorial principle in the development of the Russian market of oil products. In their opinion, "it has actually led to the emergence of monopolies in the majority of Russian regions and the division of the market according to the territorial principle".

In FAS figures, 63 percent of the Russian regions are found in the zone of highly concentrated markets of oil products.

The other weighty reason FAS sees in the reduced supply of oil products. In its opinion, "it is due to the curtailing of production by virtue of more profitable terms of exporting crude, as well as its growing export to other countries".

The letter cites the Industrial and Energy Ministry figures: only 87 percent of the produced motor gasoline and 46 percent of diesel fuel has reached the domestic market.

Another factor conducive to the growth of oil products prices FAS sees in "reducing the share of small- and medium-size business in this sphere", which cuts the oil sector's generalinterest in selling oil products on the domestic market. Experts say that, against the background of a general rise in the production of oil, small- and medium-size companies are reducing the production of hydrocarbons.

"This unfavourable dynamics has taken shape in the last three years, when small oil companies have been reducing oil production and their numerical increase has stopped", the FAS service notes.

"Alongside the above macroeconomic and structural reasons conducive to price indicator distortions, the FAS and its territorial board have been faced with the attempts of large vertically-integrated oil companies to gain unjustified profit as the expense of ungrounded price rise through monopolistic activities", the letter reads.

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