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The battle for gasoline

24 September 2023

Belogoryev Alexey M. Research and Development Director, Director of the Center for Energy strategic analysis and forecasting

Alexey Belogoryev, Research and Development Director of the Institute for Energy and Finance, commented to the Expert magazine on the reasons for increasing in prices for gasoline and diesel fuel in the domestic market.

"Now exports are about 40 percent more profitable than supplies to the domestic market," Alexey Belogoryev says,— As a result, gasoline exports in the first half of 2023 increased by 58 percent, or by 1.4 million tons."

At the same time, in the gasoline market, unlike diesel, which we produce in excess, we have a relatively small airbag, that is, the volume that can be redistributed either for export or to the domestic market, Belogoryev explains. So, in 2022, slightly more than 11% of the produced gasoline (4.8 million tons) was exported. For comparison, the export of diesel fuel accounts for 41% of the output (35 million tons). Therefore, the gasoline market is extremely sensitive to the growth of both domestic and external demand. In January‒July 2023, gasoline production, according to preliminary data, increased by 3.6%, but the entire increase was exported, and shipments to the domestic market, on the contrary, decreased by 3.7%, despite the obvious increase in demand. This led to the observed sharp increase in wholesale prices, both exchange and over-the-counter, the expert summarizes.

"Oil refiners need exports to maintain refining volumes: you can't just stop exporting motor fuels without reducing the chain of primary oil refining and the production of the same gasoline and diesel fuel," Alexey Belogoryev explains. — Without exports as a balancing factor, most Russian refineries will not be able to operate normally. Therefore, the export restrictions discussed can only be temporary measures."

There is another option not to do anything: the situation will settle down by itself. Given the undervaluation of gasoline in real terms, it was possible to calmly let fuel prices rise even more, while strictly ensuring that the vertically integrated companies did not arrange an artificial shortage at gas stations in the regions of its presence. Yes, it’s manual control — but there is nowhere in the oil industry without it. Moreover, Belogoryev recalls, the peaks of refinery repairs this year fell on May‒June and August‒September, plus winter is traditionally a low season for domestic demand, so soon the severity of the fuel shortage problem should decrease markedly.
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