Refineries are unable to keep up with domestic demand during the holiday season
The Federal Antimonopoly Service (FAS) proposed maintaining the ban on gasoline exports until the end of August. This is due to the continuing increase in exchange prices for fuel, which reached record levels for 2024. Experts interviewed by MK consider the initiative to be the only correct one in conditions when not all oil refineries are operating at full capacity and, in addition, seasonal factors affect the situation.
Let us remind you that due to drone attacks on the largest Russian refineries and, accordingly, a reduction in gasoline production, the government introduced an export ban from March to August. This made it possible to avoid shortages in the fuel market. After restoring previous oil refining volumes, the authorities decided to ease the embargo. For the first time, the export of gasoline abroad was allowed from May 20 to the end of June, then – until the end of July (this right remains in August). At the same time, interestingly, in the first third of July, average daily export volumes decreased by half compared to the average level of July 2023.
“The restriction on fuel exports will help saturate the domestic market during a period of increased demand, associated, among other things, with field work and scheduled repairs of refineries, as well as ensure price stability and availability of fuel for all categories of consumers,” the FAS said. The department’s initiative came against the backdrop of a continuing rise in market prices for gasoline. On Thursday, July 11, AI-92 and AI-95 rose in price on the St. Petersburg International Commodity Exchange by 0.7% and 1.3%, respectively, to 56.06 thousand and 68.85 thousand rubles per ton. We asked economists how justified the FAS proposal is, why factories fail to increase production, and how events will develop further.
“Despite statements from oil companies about the completion of repair work at a number of refineries, prices are actively rising. And here the role of the classic seasonal factor is very important. Firstly, domestic tourism is expanding, which cannot be said about outbound tourism: today people have switched to traveling by car throughout the Russian Federation. Hence the growth in consumer demand for gasoline, which refineries are not able to satisfy: they are just beginning to speed up production. Secondly, at the end of July, in August, harvesting will begin in some regions. Accordingly, farmers will need not only fuels and lubricants and fuel oils, but also gasoline. This is a significant risk, and regulators also need to take it into account. Supplies will need to be increased, but at what cost is unclear: there is not enough capacity, despite the completed scheduled repairs.
Thirdly, the consequences of drone strikes on refineries and oil storage facilities cannot be underestimated, although the exact extent of the damage is unknown to us. The main bottleneck here is the transport issue: it is not possible to quickly transfer volumes of petroleum products from one region to another, and this ultimately also affects prices. Finally, demand always increases during abnormally hot weather. With today's extremely high daytime temperatures, you can't travel in a car without air conditioning — even outside the city. And the air conditioner runs on gasoline, consuming more and more of it.
“The sharp increase in stock prices at the moment is due, among other things, to a seasonal increase in demand for fuel. However, since refineries are unable to significantly increase output volumes, this leads to a shortage of supply in the domestic market. Of course, extending the export embargo until the end of August could stabilize prices within the country. However, its effect will depend on the situation with gasoline reserves. If oil refining manages to achieve a surplus, the ban on supplies abroad may be lifted within one to two months. It is important to note that export prices for gasoline are more profitable for manufacturers.»
» Events in the Russian gasoline market today are causing some concern: the stock price of fuel has actually reached record levels for 2024 . Moreover, prices at gas stations have already begun to rise, albeit slightly. Demand for gasoline usually increases in the summer, during holidays and travel, which further aggravates the situation. The FAS initiative seems to be a completely logical step: refineries cannot quickly increase output due to a lack of equipment and personnel, as well as problems with the purchase of necessary materials. In the future, prices may continue to rise, and this is fraught with negative consequences for the economy and the population.