This Thursday, Russia temporarily banned the export of gasoline and diesel with immediate effect in order to stabilize the domestic market. The ban does not apply to fuel deliveries to members of the Moscow-led Eurasian Economic Union, consisting of Belarus, Kazakhstan, Armenia and Kyrgyzstan. Russia is the fourth largest diesel producer in the world after the USA, China and India.
Although the measure does not have a direct impact on EU countries where the purchase of Russian fuel was already banned, the foreseeable withdrawal of a significant amount of diesel from the already tight international market has led to an increase of about 5% in the wholesale price of diesel on the Old Continent until the threshold of 1,000 dollars (988 euros) per ton is exceeded. Brent crude oil, the benchmark in Europe, left the red figures of the first part of the day behind and closed the session in a draw.
“Temporary restrictions will help saturate the fuel market, which in turn will reduce prices for consumers,” Vladimir Putin’s government said in a statement. According to the Russian Energy Ministry, the measure will prevent the export of “gray” fuels, meaning sales through channels not approved by the Kremlin. This type of operation has multiplied due to the West’s strict sanctions against Moscow, which have forced Russian producers – accustomed to bringing their products to the EU before the war – to urgently look for new buyers.
Important input in the Russian landscape
In recent months, Russia has suffered from gasoline and diesel shortages. Wholesale fuel prices have soared, although there is a cap on retail prices to keep them in line with official inflation. The crisis has been particularly painful in some areas of Russia’s southern breadbasket, where fuel is crucial for grain harvests. Politically, a severe fuel price crisis on the eve of the March presidential election could be inconvenient for Kremlin interests.
To the outside world, the temporary ban on Russian exports is a wake-up call for the profit and loss accounts of Western oil companies, whose already hefty refining margins will most likely rise. After a few months of relative easing, buoyant consumption and falling inventories – in both cases more sharply than expected – have put diesel in the spotlight again. Although the rise in fuel prices was across the board, it was particularly pronounced for diesel, which remains crucial in transportation, industry and the countryside.
Traders claim that the fuel market has been affected by factors such as oil refinery maintenance, railway shortages and the weakness of the local currency, the ruble, which is driving down fuel prices and thus incentivizing fuel exports. According to operators and the LSEG, Russia has already cut its sea diesel exports by almost 30% in the first 20 days of September compared to the same period in August.
“In order to stabilize the situation in the fuel market, the government has increased the volumes of mandatory deliveries of motor gasoline and diesel to the raw materials exchange,” the executive statement said. “In addition, daily control of fuel purchases for the needs of agricultural producers has been introduced with a rapid adjustment of volumes.” Last year, the Eurasian country exported 4.8 million tons of gasoline and almost 35 million tons of diesel, seven times more.
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