Gasoline Crisis: Experts on Shortages and Prices

How will the gasoline crisis develop further, when will the queues disappear, and what will happen to gasoline prices? 74.RU has collected expert opinions.

In July, popular gasoline brands continued to show record price increases across the country. According to the analytical service Check Index, median prices in the first ten days of July were:

The price of diesel fuel also rose — 88 rubles ($1 at current rates), which is 11% higher than last year.

The median price is the value that divides the entire price range into two equal halves. Half of all goods cost less than this value, the other half cost more. Thus, the median price shows the real «middle» of the market, while the average price is heavily distorted by very expensive or super cheap goods.

«Volatility and price spread are high, the difference in prices between chain and independent gas stations reaches 2.1 times,» noted analysts at Check Index.

At the same time, demand for fuel is changing unevenly. In July, motorists began to fill up more with AI-92 and AI-100 gasoline — compared to last year, the number of purchases increased by 10% and 37%, respectively. At the same time, specialists at Check Index noted a decrease in purchases of AI-98 by 18% and AI-95 by 13%.

Of course, diesel fuel is in good demand — growth of 28% over six months.

The increase in gasoline costs was also noticed by the Central Bank. Fuel contributed to the June rise in the consumer price index (CPI), which grew by 0.87% compared to May and accelerated the annual growth to 6%.

«The main «add-on» to the June CPI was the sharp rise in fuel prices. The core CPI showed much more moderate growth of 0.48% and 5%,» noted Deputy Chairman of the Bank of Russia Alexei Zabotkin in the Bank of Russia Telegram channel.

According to the deputy chairman, costs are affected not only by fuel prices themselves but also by restrictions on their availability. The Central Bank will closely monitor the price picture during July and beyond — to what extent the situation on the fuel market will affect the concerns of citizens and businesses about future inflation.

«The Central Bank cannot turn a blind eye to fuel prices and inflation expectations,» admitted Alexei Zabotkin. «But we assume that the measures taken by the government will be able to normalize the situation on the fuel market.»

With a well-calibrated monetary policy, the Bank of Russia will still be able to ensure a return to the target inflation of 4% by 2027, the deputy chairman expressed confidence.

The dynamics of gasoline prices and the presence of shortages will largely be determined by the ability of oil companies to restore production volumes, experts indicated.

«According to open data, production has fallen by about 25–30% due to numerous attacks on refineries, meaning the damage is already higher than last year. Locally, of course, various measures are being taken to stabilize the situation: a ban on exports is in effect, environmental requirements are being reduced, imports from India, China, and former USSR countries are being stepped up, and the damper (a mechanism to subsidize fuel consumers on the domestic market. — Editor«s note) is being extended to imports, and so on,» noted Sergei Kaufman, analyst at Finam Financial Group. «However, these are all temporary measures that alleviate the symptoms of the crisis but do not solve the root problem. In other words, a full normalization of the situation requires restoring oil refining volumes. To do this, the damaged refineries need to be repaired and new attacks prevented.»

In most cases, refineries can be repaired within a few weeks to a couple of months, but it is more important to guarantee no new damage, the expert added. This means the situation could be normalized within a couple of months (without new damage). Against this backdrop, achieving an energy truce would be a major success for the Russian fuel market, but such talks are not currently underway.

«If production can be normalized in the coming months, then prerequisites will arise for a decrease in prices from the current anomalous levels. And then by the end of the year, price growth could return to single-digit territory,» explained Sergei Kaufman. «Without restoring production, the final price growth for the year could be even higher than last year, although the dynamics will be smoothed by growing imports and subsidies on them.»

According to the Finam expert, in the coming weeks, growth rates (according to Rosstat data) of more than 1.5% per week may persist, as imports of fuel from more distant regions (China, India) take weeks, and without this it is difficult to eliminate local shortages.

«As subsidized imports grow, weekly data will smooth out, but a sustainable decrease in prices, in our opinion, is likely only in the scenario of restoring domestic production. We also note that locally, imports are complicated by the ongoing conflict in the Middle East, due to which gasoline is currently more expensive and scarce worldwide,» concluded Sergei Kaufman.

The gasoline crisis is not over yet, but its most acute phase may end in the next few weeks, experts offered hope.

«The main reason is the physical shortage of fuel, not just the rise in oil prices. According to estimates from industry sources, gasoline production now covers about 65% of seasonal demand, and the daily deficit reaches 40,000–45,000 tons against consumption of 115,000–120,000 tons,» noted Vladimir Chernov, analyst at Freedom Global. «The government has restricted exports, increased the load on operating refineries, accelerated their repairs, and ramped up imports. At least 60,000 tons of gasoline have already been sent from India, and supplies are also coming from Belarus.»

In the absence of new major refinery shutdowns, queues should begin to shrink in the second half of July, the expert predicted.

«In most regions, the situation could normalize in August, but in the south of the country and remote regions, some disruptions may persist until early autumn due to complex logistics and increased seasonal demand,» explained Vladimir Chernov.

At the same time, a return to spring price levels is still not to be expected, according to the expert.

«Imported fuel is more expensive, and wholesale growth reaches retail with a delay. By the end of the year, gasoline may become another 5–8% more expensive relative to the beginning of July. The average price of AI-92 could approach 74–76 rubles per liter ($1 at current rates), AI-95 — to 80–83 rubles ($1 at current rates),» commented the Freedom Global expert. «With new refinery shutdowns, the increase could be higher, and AI-95 in some regions could exceed 85 rubles ($1 at current rates).»

The Rosstat figures will in any case differ from what we all see on the ground, i.e., at gas stations, the expert reminded.

«Rosstat counts wholesale, not retail. Naturally, in retail, the price increase is significantly higher than what Rosstat declares. Especially if you take the south of the country and even more so if you take Crimea. There, fuel has already reached 300–400 rubles per liter ($3–$4 at current rates) and it seems this is becoming the norm,» indicated financial expert Alexei Krichevsky. «Gradually, these data may start to even out. For example, trading in gasoline and diesel futures has already been launched on the Moscow Exchange, and there are more or less adequate indicators.»

The problem of gasoline shortage will very likely be resolved in many regions by September, the expert is confident. He links this to the upcoming State Duma elections.

«Because of this shortage, there are already problems with the harvest and so on. Moreover, it is unclear why the shortage and queues arose in the first place, if, as they say at the top, we have almost two million tons of gasoline in reserves,» reasoned Alexei Krichevsky. «Presumably, by September the situation will dissipate in most regions. First of all, of course, in Moscow and St. Petersburg, then other megacities. Why most? Because there are Crimea and the new territories, where fuel needs to be delivered one way or another. And the president, in fact, emphasized this, having instructed to develop such routes that, say, external factors cannot reach.»

How this will look is still a question, the expert added.

Expecting a return to the price levels of, say, May, is not worth it, Alexei Krichevsky agrees.

«In any case, fuel will be about 10–15% more expensive. How this will affect prices and inflation further is only a guess. Because the shortage and rise in fuel prices mean problems with the harvest, an increase in the cost of food products, and so on. This naturally drives up logistics costs. So inflation could easily spiral,» concluded the expert.