Situation at the refinery after drone attacks
The oil refining system in Russia shows a measurable decline in output during mid-March, with Kommersant reporting a 7.5% drop in load rate for primary refining facilities between March 14 and March 20, 2024, based on Reuters calculations. The shift reflects the disruption from drone strikes targeting refinery infrastructure and the surrounding logistics network.
In the wake of these attacks, processing volumes dipped to about 0.69 million tons per day. Reuters estimates indicate that gasoline and diesel production at refineries in Nizhny Novgorod, Ryazan, and Syzran could fall by approximately 5.8% and 6.6% of total Russian output. Other refineries with spare capacity may absorb part of this deficit, partially offsetting the decline.
Wholesale prices for motor fuels continued rising in Russia. On the St. Petersburg International Commodity and Raw Materials Exchange, AI-92 gasoline topped 54.1 thousand rubles per ton, AI-95 priced at 66.9 thousand rubles per ton, and summer diesel at 66 thousand rubles per ton on March 22. By March 11, prices stood at 46.9 thousand, 58.7 thousand, and 60 thousand rubles per ton respectively, underscoring the influence of supply uncertainty on markets.
Drone strikes hit the Nizhny Novgorod refinery on March 12, followed by the Ryazan plant the next day and the Syzran refinery on March 16. On March 20, the head of the Energy Ministry stated that Russia’s annual refinery output was expected to hover near last year’s level of about 275 million tons, implying resilience despite the attacks.
Officials signaled that some refineries still retain the ability to raise production where facilities were not halted. Acknowledging the disruption, they noted ongoing consultations with industry players to adjust planned repair schedules in light of incidents at several plants.
Industry observers question whether a shortage will materialize. Some argue that production remains sufficient relative to current demand, even as wholesale prices push higher. They caution that stock-market expectations can drive price movement beyond immediate supply effects, while real consumption patterns may remain stable if refinery operations stay within a narrow range of disruption.
Analysts point to exchange activity reflecting a mix of anticipation and normalization. They suggest that broader price trends will hinge on the extent of damage, the speed of repairs, and how successfully market participants manage expectations during the planting season when demand tends to rise.
From a strategic perspective, government voices may attempt to dampen market anxiety through public statements and, if needed, informal agreements with oil companies aimed at stabilizing retail prices at gas stations. These measures would target minimizing volatility while maintaining a steady supply to consumers.
Some experts foresee that extended damage could force a shift toward imports to maintain domestic supply, albeit with feasible options. Belarusian refiners, for instance, may be able to supply additional volumes if necessary, though such arrangements would depend on regional logistics and capacity utilization. Localized disruptions could still occur, especially where rail infrastructure faces congestion or bottlenecks.
Experts dissect what drives retail prices at gasoline stations. They emphasize three main factors: taxes and duties, policy agreements intended to curb price growth within inflation bounds, and wholesale market pricing. The current situation exerts a strong influence on wholesale rates, with stock quotations rising even if the physical stock flow remains adequate to meet demand. Market participants have shown an appetite to stock up as a precaution, highlighting investor psychology as a meaningful component of short-term price dynamics.
Russia annually produces roughly 42–45 million tons of motor gasoline, with a large portion not consumed domestically. Analysts believe the present damage to infrastructure is unlikely to erode the existing surplus enough to create a nationwide shortage, though some regional supply constraints may emerge depending on route reliability and rail capacity. The overall market balance remains favorable to domestic demand for the moment, as producers and distributors navigate the post-attack environment.
In summary, while the attacks temporarily reshape refinery throughput and push wholesale prices higher, the broader system shows resilience through capacity reserves and potential import avenues. The balance between supply, demand, and price will continue to hinge on the pace of repairs, the scale of disruption, and the effectiveness of policy responses in stabilizing both wholesale and retail markets.
Should we expect famine?
Industry voices contend that gasoline and diesel production in Russia still surpasses domestic consumption, suggesting retail prices at the pump may hold steady if refinery operations remain within current bounds. Critics note that price movements are driven not only by production levels but also by market expectations and seasonal demand, particularly with planting activity underway.
One analyst emphasized that stock markets react to anticipated changes in output and supply chains. He cautioned that psychological factors can elevate prices even when physical shortages are not yet evident. Meanwhile, ongoing supply assurances and flexible production plans help to maintain balance in the face of volatility.
Experts also point out that if damage proves more persistent than expected, imports could rise to fill any gaps. They mention that regional suppliers and cross-border arrangements could help avert a nationwide deficit, though logistical hurdles such as rail congestion may delay such responses.
The broader outlook remains cautious. Officials are likely to deploy a mix of verbal interventions and market stabilizing measures should price spikes become pronounced, with particular focus on keeping retail prices affordable for consumers while ensuring continued fuel reliability.
Observers note that the seasonality of demand, along with geopolitical factors and strategic reserves, will continue to influence wholesale and retail price trajectories. While some price escalation is anticipated in the short term, the structural surplus and imported volumes could prevent a full-scale shortage from developing.
What does the price consist of?
Industry researchers identify three pillars shaping retail motor fuel prices. They describe the financial component as the most immediate influence, driven by taxes, duties, and excise obligations. A second layer arises from government-to-industry agreements aimed at limiting price growth within inflation targets. Finally, wholesale pricing remains a critical determinant of the final consumer price at gas stations.
Analysts note that the present scenario places considerable stress on wholesale rates, even though stock exchanges show continued resilience in overall supply. Market participants have rushed to secure volumes as a precaution, reflecting a mix of rational planning and speculative behavior. Yet, despite heightened volatility, production levels appear capable of meeting domestic demand, according to industry commentary.
Annual gasoline production in Russia runs in the 42–45 million ton range, with a large share not consumed domestically. Experts remain confident that current infrastructure damage will not erase this substantial surplus, though regional transport hiccups could trigger localized shortages or price fluctuations.