No Gas, Second Series
The fuel shortage, which the authorities had joyfully announced had been overcome, has returned. This time, it's even more severe: Moscow and the surrounding region are suffering just as much as the other regions. Can we expect it to be overcome?
Author: Tatyana Rybakova
My Russian friends, remembering the hard times, were right: while young people were happily posting reels about how gas stations were once again operating without lines, they were diligently stocking up on essential fuel in their garages, dachas, and even on their balconies. The first rule, they explained, was to always keep the tank full and always have a 20-liter canister in the trunk. Things were a little easier for them now—no one was stuck halfway through their journey. But you can't stock up for life—you have to cancel trips to the dacha to harvest crops and change plans if they involved travel. One of my friends even considered what was more profitable for him: moving house or changing jobs. Maybe my friends were panicking for no reason?
Drones are back
First, it is worth mentioning how we managed to cope with the previous crisis.
Firstly, the redistribution of fuel across regions. Yes, it was unfair: Moscow, St. Petersburg, and other key cities received more fuel, leaving regions that were less significant to the authorities in terms of social tensions short-changed. Just like me assumedThe regions surrounding Moscow suffered the most: according to acquaintances with dachas, fuel simply disappeared beyond a 100-kilometer radius of Moscow. Nevertheless, the redistribution made some sense: it helped spread the shortage across the country.
Secondly, fuel quality was reduced. First, they allowed the sale of Euro-3 fuel, then Euro-2. The octane rating was also lowered, albeit unofficially. People with a device to measure it often discovered that AI-92 turned out to be AI-85 or even lower. Thirdly, additives were allowed—without restrictions. Some of them are quite aggressive—both for car engines and for the environment. But refineries whose distillation columns, where raw materials (gas oil or straight-run gasoline) are converted into high-quality gasoline, were able to sell straight-run gasoline. Yes, it can ruin a car's engine within a few dozen kilometers, and there are already many such cases, but gasoline is now available at gas stations.
Third, we quickly reached agreements with other countries—Kazakhstan, Belarus, and others—on fuel supplies. India became the most important supplier: it has significantly larger export volumes, and some of the largest refineries are owned by Nayara Energy, 49% of which is owned by Russia's Rosneft.
All these efforts could have been successful: gasoline demand would decline as early as the fall, and refineries could partially return to service. But drone attacks on refineries have resumed: following the strikes on Wildberries warehouses, almost a third of Russia's largest refineries were hit. Here's a timeline from August 1 to 15:
| date | Object | Aftermath |
|---|---|---|
| August 2 | Saratov Refinery | Processing has stopped |
| August 3 | Volgograd Oil Refinery | Processing has stopped |
| August 5 | Bashneft-Novoil | Damage to process equipment reported |
| 5-6 August | Yaroslavl Oil Refinery | A fire was recorded on the premises of the enterprise. |
| August 10 | TAIF NK/TANECO | There is no information about damage. |
| August 10 | Ilsky Oil Refinery | There is no information about damage. |
| 11-12 August | Orsk Refinery | The Orenburg Region Governor announced the plant would be shut down for at least six months due to damage to imported equipment. |
| August 13 | Gazprom neftekhim Salavat | A fire broke out after the attack. |
A change in the Ukrainian Armed Forces' tactics is noteworthy here. Firstly, the destruction of refineries in oil-producing regions (Bashkortostan, Tatarstan, Volgograd) suggests that refineries far from the fields could be further cut off from raw material supplies through attacks on pipelines. Secondly, drones are now increasingly targeting process equipment, primarily distillation columns. The fire may not be as dramatic as if they hit tanks, but the damage can be catastrophic: many refineries have modernized their capacities with imported equipment, while units producing high-octane gasoline of Euro-4 and higher standards are exclusively imported. This is confirmed by the fact that some refineries, such as the Yaroslavl refinery, have already been attacked multiple times: apparently, the initial attempts failed to destroy sensitive production equipment.
Incidentally, Wildberries wasn't overlooked either: during the same period, logistics complexes and warehouses were attacked in the Moscow, Leningrad, Tver, Voronezh, and Sverdlovsk regions, as well as in Bashkortostan.
Will India help?
The current situation is as follows: analysis The Institute of Energy and Finance (IEF) shows that in most large regions, 30% to 50% or more of gas stations are empty. Tellingly, Moscow and St. Petersburg, along with their surrounding regions, are among the hardest-hit regions this time. Apparently, the regions have run out of gas left to take, especially since harvesting season has begun in many of them, and without fuel supplies, Russia could, quite literally, face a food crisis. Queues grow, and the government continues to “instruct” and “review the situation.”
Gasoline, quickly purchased from India and even Morocco, is stuck in the port of Murmansk: it took a long, circuitous route (in the Black Sea, Russian ships became targets for drones, submarines, and aircraft), and now traders are arguing with the Ministry of Energy over the price at which it can be sold. Taking into account all costs, it's unprofitable for traders to sell this gasoline for less than 150 rubles per ton, and the approved price is less than 113 rubles. But if the government meets the traders halfway, gasoline prices at gas stations will have to double—assuming the government covers part of the price with dampening payments. Is this the case of the tanker that delivered... according to media reports, the first 42 thousand tons of gasoline from Nayara Energy, is unknown.
However, as experts' calculations show, Indian gasoline can alleviate the problem, but it cannot completely eliminate the fuel shortage. As I already Wrote, the volumes that can be imported still don't fully cover Russia's needs. Journalist Dmitry Kolezev countedTo fully cover Russia's needs, even taking into account the decline in seasonal demand, tankers like the one from Nayara would need to dock at Russian ports every one to two days, and transporting such volumes would require 20 to 25 tankers. Meanwhile, Ukrainian drones have repeatedly demonstrated their ability to strike both Russian ports and "shadow fleet" tankers. A telling example: after the joyous announcement of the arrival of Indian gasoline on August 14, the port of Ust-Luga, one of Russia's main ports for oil and LNG (liquefied natural gas) exports, was attacked again. Incidentally, this time the Ukrainian Armed Forces targeted NOVATEK's LNG terminal, but the implication is clear.
New reality
There are currently no good solutions for overcoming the fuel shortage. India can alleviate its severity, but it won't satisfy all demand. Redistribution is also not an option; there are no surpluses anywhere. Refinery repairs are pointless given the inevitable repeat attacks—though the government will likely begin forcing their owners to carry out these repairs. The proposal to use companies themselves to create air defense systems for refineries is quite insane: firstly, their effectiveness, as demonstrated by the attack on the Moscow Oil Refinery, which had mobile air defense systems, is very low. Secondly, the emergence of large corporate paramilitary units capable of shooting down more than just drones and equipped with machine guns and assault rifles with live ammunition is a sure path to civil war. If a pistol was used in a dispute over Wildberries, for example, what would happen if two companies argued over, say, the redistribution of gas stations? And the proliferation of heavy weapons throughout the country, including their distribution to organized crime, is a nightmare for any sane person.
It seems Russia will have to accept a new reality, where gasoline shortages become permanent—with the situation improving or worsening depending on attacks by the Ukrainian Armed Forces. This means sales restrictions, low-quality fuel, and other "pleasures" of the crisis are becoming commonplace. This is bound to impact the entire Russian economy.
First and foremost, this means rising transportation costs. Anything from air travel to trucking. The latter directly impacts the cost of goods, meaning consumer inflation, which has subsided somewhat recently, will rise again. Yes, for non-food items, prices will be held down by falling demand: when prices rise faster than incomes, people begin to reduce their consumption of non-essential goods and services. However, inflation could have a full impact on essential goods. The government understands this and is preparing for it.
The Federal Antimonopoly Service has launched an investigation into the justification for price increases at major poultry and beef producers. For now, it's believed that the reason is that chicken and beef have become significantly more expensive since the beginning of the year. However, just a week before the investigation began, their prices began to fall. And on August 4, Vladimir Putin signed Federal Law 280-FZ, amending the law on trade regulation. The essence of the amendments: monitoring prices of products included in the basket used by Rosstat to calculate food inflation. To this end, the relevant agencies (currently referring to the Federal Antimonopoly Service, the Ministry of Industry and Trade, the Ministry of Agriculture, and the Ministry of Economic Development) will directly receive data from the Federal Tax Service on the activities of all companies involved in the production and delivery of these products—from fields and farms to store shelves. For now, this is only monitoring and analysis, but what happens if the agencies determine that someone has inflated prices? The inclusion of the Federal Antimonopoly Service on this list seems to hint at the consequences. It also means an end to tax secrecy: when four agencies simultaneously receive highly sensitive information about market participants' transactions, one can be sure that the databases will immediately appear on the darknet.
However, regulating prices—and this is precisely what the entire situation is leading to, be it in the fuel market, the food market, or anywhere else where fuel impacts operations (and where doesn't it?)—maybe not a market-based approach, but it is acceptable in an acute crisis when it's necessary to curb excessive demand. But on a permanent basis, such measures lead to what already happened in the USSR and other "developed socialist" countries: commodity shortages. The result could be the old Soviet model, where there's nothing on the shelves (in today's conditions, on the "social" shelves), but everything is available on the market, but at exorbitant prices. Speculators, meanwhile, offer prices below the market price, but higher than the official price. The outcome is also clear.
