Fuel Shortage Declines, But Prices Still Rise

This August, several Russian regions experienced a sharp increase in gasoline prices, coupled with supply shortages. The Far East and Crimea, areas known for complex logistics, were particularly affected. What are market participants predicting for the future?

Gasoline continues to become more expensive, even as the fuel deficit lessens. Throughout August, residents of Zabaykalsky Krai and the Far East queued at gas stations, while in Crimea and Primorye, fuel was rationed with coupons. Exchange prices consistently broke two-year records daily.

While efforts were made to stabilize prices in mid-August, and authorities in the peninsula even declared the situation under control, fuel prices began to rise again in September.

On the St. Petersburg Exchange, AI-92 gasoline saw a nearly 5% increase over the week, and although AI-95 slightly decreased in price over the past two days, it remained above 80,000 rubles per ton as of Friday. In Crimea, gasoline has reappeared at stations, but prices are still climbing, according to Crimean journalist, blogger, and public figure Alexander Gorny:

Alexander Gorny
Crimean journalist and blogger

“Virtually all gas stations now offer diesel, AI-92, AI-95, and AI-95+ gasoline. However, prices have unfortunately risen. For instance, a liter of AI-95 gasoline now costs 71.99 rubles, a price consistent across almost all stations. AI-92 gasoline is priced between 63.50 and 64 rubles per liter. When we compare these to prices in the Southern Federal District, they are significantly lower there. Crimean officials are attempting to justify this by citing a market deficit and high logistics costs, but that offers little comfort.

Many tourists visiting Crimea have noted the exceptionally high cost of gasoline, averaging 5-7 rubles more expensive than on the mainland. This situation has persisted for many years, and no one seems able to explain how to resolve it; in effect, we`re paying a `Crimean fuel tax.` According to predictions from those in the fuel station industry, the price of AI-95 gasoline could increase to 73-75 rubles, which they consider an optimistic forecast. Many tourists have now departed, but the `velvet season` is beginning. People are primarily arriving by train rather than car, which should help balance fuel availability at stations on the peninsula. So, I hope we won`t see a deficit, but we will likely see fuel costs continue to climb.”

The situation would be even graver had there not been an export ban on fuel for non-producers, extended until the end of October, states Maxim Dyachenko, managing partner at Proleum:

Maxim Dyachenko
Managing Partner, Proleum

“Until the market is saturated, until we see a significant drop in quotes – they should adjust by at least 10,000 rubles per ton, which translates to about 7 rubles per liter at gas stations – it`s probably too early to lift the ban. The volumes that have now appeared in regions like Crimea and the Far East are thanks to the Ministry of Energy, which made significant efforts to accelerate logistics, ensuring prompt shipment and delivery. Currently, wholesale prices are quite high, and retail prices at gas stations result in losses during sales. Therefore, gas stations, receiving such expensive goods, unfortunately have no reason to sell them cheaper at the moment. This trend could continue for a couple more months, because until cheaper fuel arrives with a similar time lag, companies unfortunately lack the ability to adjust prices. Realistically, this will take about a couple of months, September-October.

We traditionally have refinery maintenance work, and this year, significant unscheduled shutdowns were added. These conclude by the end of October simply because refinery repairs cannot be conducted during winter frosts, and it`s already quite cold in November. Consequently, we`ll see a massive increase in capacity, a sharp rise in production, and a decrease in prices. Therefore, we should see price adjustments by November.”

Over the past week, the average price of gasoline at gas stations increased by 19 kopecks per liter, and diesel by 5 kopecks. Since the start of the year, fuel price hikes at gas stations have outpaced inflation by more than a third, as noted by the Ministry of Economic Development.