How the authorities can make up for the missing fuel volumes as a result of attacks on refineries

In March, for the first time in two years of hostilities, the largest Russian refineries, which produce high-quality motor fuel and supply the domestic market, were hit. The consequences of the attacks are sensitive to the profits of oil companies, but so far they are not catastrophic either in terms of the timing of the return of affected production facilities or in terms of supplying the domestic market for most products. The total loss of gasoline and diesel fuel production as a result of the attacks could amount to 5–6% of its production in the Russian Federation. In the case of diesel fuel, this is an insignificant volume, since up to 40% of it is already exported. But for AI-95 gasoline the situation is different. Last year already showed that during the summer period of peak demand this particular variety is in short supply due to the growth of domestic tourism and supplies to new regions.

Now the authorities and oil companies need to find the missing volumes for the next three to four months, while the damaged refineries are being repaired. There is such a source – these are Belarusian refineries, which export about 3 million tons of gasoline per year through Russian infrastructure, mainly Baltic ports. Typically, Belarusian producers sell little to Russia, since prices here are lower than when exporting. However, in this situation, the Russian authorities could allocate additional funds for the purchase of Belarusian gasoline, while simultaneously using as arguments to reduce the purchase price the fact that Belarusian refineries operate exclusively on Russian oil and have no other way to export petroleum products other than through Russia .

A second solution would be to increase the damper (subsidy for refineries) for the summer to maximize the utilization of available refinery capacity. Also, an increase in the damper could curb the dynamics of wholesale gasoline prices, which always rise in the summer even without any accidents. Attempts to stop this growth solely through administrative methods are doomed to failure and can only lead to fuel shortages. This is evidenced by both Russian and foreign practice. And some increase in wholesale prices for gasoline may be useful, as it will lead to a switch of some consumers to propane-butane.

Both purchases in Belarus and the increase in the damper imply an increase in budget costs, which will meet resistance from the Ministry of Finance, unless the costs are offset by new taxes for oil companies. Nevertheless, tax increases should be accepted, since if the panic is not extinguished now (which is still quite possible), one will have to deal with the dire consequences of an imbalance in the fuel market. And, of course, all these measures are unlikely to be effective unless oil companies are given the means to protect refineries and permission to use them.