The issue is that domestic gasoline production capacities are only 10-15% ahead of domestic demand. In contrast, diesel fuel is produced at volumes 40-50% above local demand, making it the primary export commodity in the oil product lineup.
Currently, there is a complete ban on gasoline exports effective until 31 July. Only producers, specifically oil refineries (OR), are allowed to export diesel fuel, while traders are prohibited from doing so. On 23 June, Deputy Prime Minister Alexander Novak stated that the authorities are considering the possibility of imposing a complete embargo on diesel exports, characterising the situation in the Russian fuel market as "complex but manageable."
The current situation is linked to unscheduled repairs at refineries due to massive drone strikes in May and June. Fuel production volumes have decreased, forcing buyers to change suppliers, while transportation has also encountered difficulties.
The problem lies in the fact that data regarding the production of gasoline and diesel fuel in Russia is classified. We do not have precise knowledge of how much production has decreased, leading us to rely on external sources for information. According to a rather pessimistic estimate by Reuters, production has fallen by 25%. Even accepting this figure, such a decline is critical for the domestic gasoline market, but appears to be less severe for diesel fuel.
As noted in a discussion with "RG" by Yuri Stankevich, Deputy Chair of the State Duma’s Energy Committee, a complete ban on diesel fuel exports is a strict and quite radical measure, and its effects will depend on the duration and regulatory parameters of the ban. In the short term, it has the potential to stabilise wholesale prices and partially alleviate pressure on retail prices. However, in Russia, prices at petrol stations are largely regulated by a damping mechanism (subsidies for oil companies for supplying fuel to the domestic market at prices lower than export prices) and tax burdens. Hence, we should not expect drastic price reductions—rather, a slowdown in growth or moderate corrections.
Stankevich affirms that there is currently no systemic shortage of diesel fuel in Russia. Localised disruptions do occasionally occur, due to logistics, refinery repairs, or seasonal demand increases (harvesting, northern deliveries). The export ban itself does not resolve logistical issues. While it will increase domestic resources, if the bottlenecks are related to rail transport or regional infrastructure, the acceleration of delivery will be limited.
According to Sergey Frolov, Managing Partner at NEFT Research, the Russian fuel market currently faces the most significant shortage in recent history. The deficit is felt across all major fuel types, except liquefied petroleum gases (LPG) and fuel oil. The expert believes that prohibitions will not resolve the underlying issue. Regarding diesel fuel, which has traditionally experienced a systemic production surplus, this ban will only serve to lessen the severity of the problem.
A similar assessment of the ban is shared by Dmitry Gusev, Deputy Chair of the Advisory Board of the "Reliable Partner" Association and member of the Expert Council of the "Fuel Stations of Russia" competition. He believes that the measure will help replenish diesel stockpiles and assist agricultural producers and industrial consumers.
While the diesel export ban does not directly influence gasoline supplies and prices, it sends a significant signal to refineries to control the price increases for all types of fuel using any possible means. As Sergey Tereshkin explains, the ban on diesel exports will be far more impactful for Russian refineries than a ban on gasoline exports. Diesel remains one of the two key export oil products—alongside fuel oil—yet the margin for production and export of fuel oil is lower compared to that of diesel.
Therefore, oil refineries will not be able to ignore the message from the government. However, the ban on diesel exports carries risks for the entire domestic oil refining industry. Stankevich suggests that should oil companies lose margins on diesel exports (traditionally a more profitable product), their overall refining profitability may decrease. This increases dependency on damping payments for gasoline. In unfavourable circumstances, such an approach could put additional pressure on the budget or necessitate adjustments to regulatory mechanisms. Furthermore, there is a risk of oversupply in the market if the ban is prolonged (over 1-2 months) and coincides with a period of weak domestic demand.
Tereshkin expresses a similar view, arguing that the diesel export ban will only have an effect if it is short-lived—no longer than one quarter. Otherwise, the industry will face not only a reduction in oil refining but also a decrease in extraction levels.
Moreover, as Stankevich emphasises, decreased refinery utilisation will lead to a proportional reduction in the output of all oil products, including gasoline. Thus, during a prolonged diesel export ban, there could be indirect effects on gasoline supply—not due to diminished demand, but rather because of the technological limitations on processing.
Frolov, however, offers a different perspective. He asserts that there is currently no risk of oversupply—rather, it is imperative to prevent a collapse in the domestic market. He believes that the resilience of the oil industry has nearly reached its limit, and in due course it may be easier to refrain from repairing refineries than to reopen them only to face setbacks shortly thereafter. Immediate measures are needed for gasoline and aviation fuel, which the Ministry of Energy proposed as early as March. Such a package of measures could prevent restrictions on fuel supplies for individuals (in some areas, it is currently unavailable to them) and allocate volumes based on the importance for the functioning of the entire transport system.
Only a prompt influx of imported fuel during the repairs of the impacted refineries can resolve the issue of physical access to resources and reduce prices, according to Frolov. Until then, even administrative measures will fail to control price increases in either wholesale or retail markets.
It is worth noting that in addition to the diesel export ban, the government is considering other measures to support the domestic fuel market. Reportedly, these include amendments to the Tax Code, enabling certain (authorised) companies supplying imported fuel to receive damping payments. This will mitigate the price difference between imported and domestic fuel. There is also consideration of potential payments for dampening mechanisms for medium and small refineries that produce automotive gasoline by mixing straight-run gasoline (the primary product of oil refining) with other components.
Gusev has offered a unique perspective, suggesting a strategic approach to reduce gasoline consumption in favour of alternative fuels. This could be achieved by eliminating the Utilisation Fee, VAT, and customs duties on the import of diesel passenger cars into Russia. Diesel consumption would increase, while the demand for gasoline would decrease.
Source: RG.RU
