Why the authorities have extended the fuel export ban

Alexey Belogoryev, Research and Development Director of the Institute for Energy and Finance, commented to RBC about the current stage and prospects for the development of the fuel crisis in Russia, the state of exchange trading, and the problems faced by independent gas stations.

According to Alexey Belogoryev, extending the ban on gasoline exports was inevitable because there remains a significant real shortage in this market. The embargo has been extended for six months at once.

“It’s likely that even the government isn’t sure that the production situation will be normalized in the fourth quarter,” he says. 

At the same time, according to the expert, restrictions on diesel fuel exports may be lifted ahead of schedule. The authorities are proceeding from the assumption that the balance of supply and demand will remain fragile in August, so it’s too early to return to exports, but the situation could change quickly.

According to indirect data, the expert claims, diesel fuel production is currently roughly equal to domestic demand, and, taking into account the completion of repairs, it may soon exceed it. A possible surplus will quickly lead to overstocking of storage facilities, so it will be necessary either to urgently allow exports or to reduce primary processing, which is unacceptable given the gasoline shortage.

Despite the measures taken by the government, experts do not observe any signs of a full normalization of the market. According to Belogoryev, there is still no pronounced stabilization in either production or the availability of gasoline at gas stations across the country as a whole. The targeted improvements are mainly due to the redistribution of commodity flows and the partial elimination of bottlenecks in railway logistics. Moreover, a pronounced regional differentiation remains, he noted.

The situation is not improving everywhere, Belogoryev reported. The most difficult situation persists in regions where independent gas stations account for a significant share of the retail market. Among such regions, the expert named the south of Russia, including the North Caucasus, the Novosibirsk Region, the Altai Territory, and the Sverdlovsk and Chelyabinsk Regions.

This problem is systemic in nature, Belogoryev believes. In the context of a general shortage, the natural priority for vertically integrated oil companies (VICs), which control almost the entire production of commercial motor gasoline, is to supply their own gas station networks and to comply with the government’s recommendations regarding fuel supplies to farmers, government agencies, and other priority categories of consumers. Under these conditions, independent oil depots and gas stations either cannot buy gasoline at all or are forced to purchase it at inflated prices.

An additional blow was the reduction of the mandatory sales quota for gasoline on the St. Petersburg Exchange from 15% to 10%, since it was the main purchasing channel for independent operators. Small gas station operators, who are unable to purchase large wholesale batches at once (a railway tank car weighing 60 tons or more) and depend on small‑scale sales from regional private oil depots, have found themselves almost completely cut off from the exchange sales channel, Belogoryev explained.

Experts agree that the situation by the end of the year will depend primarily on the recovery of refining volumes. The crisis is based on a sharp decline in production due to UAV strikes; without resolving this key problem, it will be impossible to normalize the situation, no matter what measures the government takes, Belogoryev believes.