Second wave of fuel crisis hits Russia with long lines and tighter sales limits — NV analysis

5 September, 11:16 PM

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Russian dictator calls fuel shortage ‘not critical’ as crisis spreads across dozens of regions (Photo: Reuters)

In late August, gasoline disappeared in Yakutia, a gold- and diamond-producing region in northeastern Russia, thousands of kilometers not only from the Ukrainian border but also beyond the range of Ukraine’s Defense Forces drones. Long lines formed at gas stations across the region, which is larger than India.

Aysen Nikolayev, head of the vast region, acknowledged the cause of the fuel crisis: Ukrainian drone attacks on Russian oil refineries. He urged residents to remain calm and view the difficulties as temporary.

But in Russia, nothing is more permanent than temporary difficulties. After the fuel crisis in mid-summer and a brief reprieve, problems have returned to gas stations across the gas-station state.

The Kremlin is trying to “save face,” working hard to prevent fuel lines in Moscow and St. Petersburg. But that “distorted reality” does not extend to the regions.

In early September, Russian media outlet Activatica reported that in Tyumen, the center of a region that accounts for more than half of Russia’s oil production and about 90% of its gas output, gasoline lines begin forming at 5 a.m. Farther west, in Perm, local Telegram channels estimate the lines stretch “six kilometers or more.” On the Volga, in Nizhny Novgorod, even public transit vehicles are lining up at the pumps.

By the end of August, Russian gasoline production was covering about 70% of domestic consumption, Reuters reported, citing two industry sources. Output averaged about 90,000 metric tons per day over the month, compared with estimated summer demand of 115,000 tons.

Meduza, an independent Russian outlet in exile, analyzed about 500,000 crowdsourced reports from the GdeBENZ service and found that, among a sample of 2,176 gas stations, the share where gasoline was available without a line fell from 46% in late July to 32% in mid-August.

Bloomberg’s calculations help explain the shortage: Ukraine struck Russian refineries at least 21 times in August alone, the highest number in any single month of the full-scale war. Russian oil refining fell to just over 3.8 million barrels per day, the lowest level in two decades, according to EA Analytics.

Limits of 20–30 liters, sales based on odd- and even-numbered license plates and, in some places, requirements to show vehicle registration documents have become commonplace across dozens of Russian regions. The wholesale price of AI-95 gasoline on Russia’s exchange reached a record 82,380 rubles, or about $950, per metric ton, while the average retail price peaked at 74.55 rubles, or $0.86, per liter on Aug. 24, according to GlobalPetrolPrices. In some regions, prices were well above 100 rubles per liter.

“I simply urge everyone who has encountered a situation where there is no gasoline to decide: Do you believe Rosstat, do you believe the sources relied on by armchair academics, or do you believe what you see outside your window?” Russian independent economic analyst Vyacheslav Shiryaev told his compatriots.

What burned

Ukrainian drones typically target several key units at Russian refineries — atmospheric distillation and hydrocracking units. Shiryaev compares a refinery with a port: A port has no single node whose destruction can paralyze the entire operation, while a refinery does, and losing it can shut the plant down for months.

In August, Ukraine’s Defense Forces struck some of Russia’s largest refineries. State-owned Rosneft’s Ryazan refinery lost two of its three primary distillation units. The Kstovo refinery, Russia’s second-largest gasoline producer and owned by Lukoil, shut down for the fifth time in less than five months. The Volgograd, Novokuibyshevsk, Saratov and Perm refineries stopped operations entirely.

The most significant blow to Russian refining came on Aug. 30, when Surgutneftegas’ Kirishi refinery in Leningrad Oblast completely halted processing after a drone attack. The plant is Russia’s second-largest refinery by capacity after Omsk, with annual capacity of 20 million metric tons, or 7% of Russia’s total oil refining. It is the main fuel supplier for St. Petersburg and northwestern Russia.

Reuters sources said drones damaged two primary distillation units at Kirishi, while the other two were already offline at the time of the strike. The plant had already undergone prolonged repairs twice this year, in March and May, after previous strikes, and was operating at about half capacity in August.

The Moscow refinery in Kapotnya, which drones struck this summer and which supplies about 40% of the capital’s gasoline and half its diesel, may not return to operation before the end of the year, sources said. Orenburg Oblast Gov. Yevgeny Solntsev publicly announced that the Orsk refinery would be out of operation for six months.

By Aug. 27, all of Lukoil’s major Russian refineries were simultaneously offline, Reuters reported. Shiryaev estimates that the company has suffered the most. He does not predict bankruptcy but considers losses, overdue loans and restructuring inevitable, along with the risk that a weakened Lukoil could become a takeover target in a broader redistribution of assets.

Russia cannot repair its refineries fast enough. Sanctions block access to Western spare parts, forcing operators to strip components from functioning units to repair damaged ones. As a result, Russia will reach a sustained shutdown of about a quarter of its refining capacity within 6–12 months, analyst George Voloshin predicted to The Insider.

The Kremlin has been unable to protect 40 major plants scattered from the Kuban to Siberia. “Show me even one Pantsir protecting an oil refinery. That’s it — there are no air defenses left,” Shiryaev said, stressing that Russia does not have the kind of air defense system Ukraine spent five years building.

Russian dictator Vladimir Putin, meanwhile, continues to use official channels to push the message that there is “some shortage,” but that it is not critical. Russian Deputy Prime Minister Alexander Novak on Aug. 31 simply ordered tighter price controls at independent gas stations.

Outside television studios, however, Russian authorities are doing something else. The government has already legalized sales of gasoline below the Euro 5 standard, rolling environmental regulations back 12 years, extended the ban on diesel exports and required gas stations to list the fuel’s environmental class directly on receipts.

How severe is the fuel crisis really? Shiryaev maintains a spreadsheet tracking 40 plants, updating it every two weeks using open-source data and information from industry contacts. He says only 30–35% of gasoline production capacity remains, while Russia is producing diesel at about two-thirds of its own consumption.

His opponent, Sergei Vakulenko, a senior fellow at the Carnegie Russia Eurasia Center and former head of strategy at Gazprom Neft, estimates refining losses at 13–17%. His main argument is that if refining had fallen to one-third of its previous level, about 2.5 million barrels per day would have had to be exported as crude oil, something reflected neither in tanker flows nor in traders’ data.

But the two sides are measuring different things: the total nominal capacity of all damaged facilities, actual refining on a given day and the gasoline balance in the retail market.

The Kremlin classified official refining statistics in 2023.

What comes next

The cost of the crisis is already weighing on Russia’s budget. The fuel shock has added 1–1.5 percentage points to annual inflation, the government cut its 2026 GDP growth forecast from 1.3% to 0.4%, and the federal deficit reached 6.01 trillion rubles, or about $81.4 billion, from January through May as oil and gas revenues fell 29.8%.

Oil and gas budget revenues totaled 424 billion rubles, or about $4.9 billion, in August, down 16% from a year earlier, according to Russia’s Finance Ministry. Revenues were lower this year only in January, while oil prices remain high because of the war in Iran and continue to support earnings. At the same time, revenues from seaborne petroleum product exports fell 45% month over month.

Fuel subsidy payments under Russia’s damper mechanism, which compensates oil companies for the difference between export and domestic prices, totaled 113 billion rubles in July and rose to 197 billion rubles, or about $2.3 billion, in August. The 84 billion-ruble increase was partly because gasoline importers now also qualify for the subsidy, while Indian fuel that Russia imports through ship-to-ship transfers has proved very expensive. In other words, the budget is paying not only for lost refining capacity but also to ensure that gasoline bought abroad is sold at Russian prices.

High fuel prices are adding to inflationary pressure. And not only that: Shiryaev said farmers wrote to him throughout July and August that some depots had no diesel, while what was available was priced so high that harvesting became unprofitable.

Alexandra Prokopenko, a fellow at the Carnegie Russia Eurasia Center and former adviser to Russia’s central bank, believes that when authorities conceal information about problems, people suspect the situation is far more serious and rush to stock up.

Authorities have also restricted data on retail fuel prices. Elections to Russia’s State Duma are scheduled for Sept. 18–20. As The Wall Street Journal noted, no one considers them free, but even such a vote gives Russians a platform to quietly express dissatisfaction.

There is therefore no free-market pricing at Russian gas stations now, Shiryaev said: The Federal Antimonopoly Service, tax authorities and prosecutors are visiting gas stations, issuing fines and threatening prosecutions. “Everyone has been ordered to hold prices until the election. After the election, maybe we’ll see 350 rubles per liter, and much more,” the expert said.

What happens next will depend primarily on the pace of the strikes. Kpler analysts warn that repairing critical units will take months, while Rystad Energy forecasts average refining of about 4 million barrels per day by the end of the year, nearly 30% below the seasonal norm.

Russia will not run completely out of gasoline, however. Four plants — Yaya, Surgut ZSK, Angarsk Petrochemical Complex and Amur — are beyond drone range, while there is also a Belarusian “trickle” and concealed ship-to-ship transfers from India and Asia.

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