Fuel – more
Strangely enough, there is no reason for alarm. Restrictions on exporting oil and gas from Russia are likely to boost the domestic market rather than create shortages abroad.
Sanctions against Russia as a state naturally reduce the amount of fuel, oil, and petroleum products available for foreign markets. This shift tends to push export volumes toward the home market, strengthening domestic availability.
Today, the Russian fuel market at home is notably more saturated than before. The larger quantities moving into the domestic system create a surplus when supply surpasses demand.
Prices – down
In several regions, petrol and diesel prices have edged down gradually.
With export restrictions in place, motorists may benefit from the increased supply, as oversupply tends to drive prices lower.
Experts expect the price decline to be modest under current circumstances, perhaps around a 10% drop from early March levels.
For how long?
The domestic fuel surplus is likely to persist until exports resume fully, which may occur after a realignment of the financial system in response to sanctions, or as new markets open. In other words, falling auto fuel prices are not permanent.
A similar pattern emerged in March–April 2020 when a lockdown reduced road traffic dramatically. Storage issues arose because production and processing volumes could not be sharply curtailed. Prices fell, and on international markets oil briefly traded below zero.
Today, the outlook is different. The economy is recovering from earlier restrictions and demand for fuel is rising. Even if export deliveries to Western markets remain blocked, some of the previously weak demand should return to Russian motorists.
Additionally, the eastern export route remains active, accounting for roughly 30% of all Russian exports of oil and oil products. Asian markets are prepared to absorb lower demand, with logistics improvements expected to bridge the gaps in the medium term.
To temper oil prices, some nations may draw from strategic reserves, offering temporary price stabilization. These measures are one-offs; reserves are finite, and replenishment will come at higher global prices.
Oilers and networkers won’t disappoint you?
There is confidence in Russia’s refining sector as it navigates the current challenge. In the country, 27 large refineries have undergone modernization, reducing reliance on costly new equipment and keeping the system relatively stable in the face of sanctions.
The retail fuel market, the network of gas stations where drivers refuel, also deserves attention. Sanctions may affect certain equipment and software, potentially causing short-term malfunctions at individual stations. Yet any issues are likely to be localized, and operators are expected to resolve them quickly.
Crucially, Russia maintains a complete fuel production cycle, from crude extraction to consumer sales, reducing the risk of a rapid energy shortfall in the near term.
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