Russia economy meltdown as petrol stations run dry and rationing introduced

Ukraine's targeting of Russian oil refineries has resulted in long queues at petrol pumps (Image: GETTYAP)

Russia is facing a fuel crisis as petrol stations run dry, motorists queue for hours, and rationing is imposed in several regions. Weeks of Ukrainian drone strikes on oil refineries have slashed production, driving prices to record highs and forcing officials to restrict or even halt sales altogether.

Gas stations have run dry in some regions of Russia after Ukrainian drones struck refineries and other oil infrastructure in recent weeks, with motorists waiting in long lines and officials resorting to rationing or cutting off sales altogether. Wholesale prices on the St Petersburg International Mercantile Exchange for A-95 petrol — the highest octane — spiked to record highs last week, soaring to about 50% higher than in January, as demand surged from farmers seeking to bring in the harvest and Russians hitting the roads for their last big holiday of the summer.

Russia: Ilsky oil refinery hit by Ukrainian drone strike

Russian media outlets reported fuel shortages are hitting consumers in several regions in the Far East and on the Crimean Peninsula, which was illegally annexed from Ukraine by Moscow in 2014.

Media outlets in the Primorye region, which borders North Korea, reported long queues and prices of about 78 roubles per litre (approximately $3.58 per gallon) at petrol stations in the area, where the average monthly wage is about $1,200. Journalists at local news outlet Primpress found other drivers trying to sell petrol online for as much as 220 roubles per litre (about $10.12 per gallon).

In the Kurilsky district of the Kuril Islands north of Japan, shortages of lower octane A-92 petrol forced officials to halt public sales outright. In Crimea, a popular resort area, some companies sold fuel only to holders of coupons or special cards.

Russia is no stranger to petrol price increases at the end of summer. But this year's shortages have been aggravated by Ukraine’s attacks on oil refineries in the 3 1/2-year-old war. Larger, more concentrated attacks are causing more damage and hampering production, all timed to coincide with peak demand.

Russian Emergencies Ministry firefighters extinguish the flames at a fuel and lubricants warehouse (Image: AP)

Ukraine has targeted energy infrastructure before, but the recent strikes have been more successful, with more drones targeting a more concentrated group of facilities.

Sergey Vakulenko, a senior fellow at the Carnegie Russia Eurasia Center, said: “The Ukrainians are attacking an arc of refineries, starting from Ryazan, which is south of Moscow, all the way to Volgograd. That region is where people are driving through on their way to (resorts on) the Black Sea. That’s the region where most of the harvest operations are going on. And that’s also a rather densely populated region.”

These attacks have damaged many oil refineries but have not destroyed them outright, Mr Vakulenko said, adding that most of the facilities are extremely resilient against fires.

Other war-related issues have caused even more consumer pain. Ukrainian drone strikes repeatedly have disrupted Russian transportation networks, particularly air traffic, causing more people to travel by car and increasing demand for petrol, Mr Vakulenko said.

Inflation also has made it less profitable for suppliers who normally buy petrol early in the year for sale in the higher-priced summer months, and many entrepreneurs simply decided not to bother this year, he said.

Mr Vakulenko wrote in a recent commentary that annual diesel production is “more than double than what is needed.”

Between August 2 and 24, Ukraine attacked oil infrastructure at least 12 times, according to media reports. Of those attacks, at least 10 were targeting sites in the Ryazan–Volgograd arc in south-western Russia.

But they can slow refinery activity, as shown by a fall in the intake of crude oil to be turned into diesel, petrol or other products by roughly 200,000 to 250,000 barrels per day, said Gary Peach, oil markets analyst at Energy Intelligence.

Russian President Vladimir Putin (Image: Getty)

Mr Peach said: “That’s just enough to make their gasoline industry feel some pain, especially during the high consumption months in the summer.”

Petrol production fell 8.6% in the first 19 days of August, compared with a year earlier, and diesel production was down 10.3%.

Mr Peach said: “The gasoline shortfall isn’t system critical.”

So far, the shortage remains confined to certain areas — the Far East and Crimea — because these regions usually are supplied by fewer refineries and present greater transportation demands.

Moscow has been spared the latest petrol price spike because it is well-supplied from major refineries in Yaroslavl, Nizhny Novgorod and within the capital itself. The city also has a refinery of its own.

Yet Russia is not at immediate risk of grinding to a halt — even in more vulnerable regions, experts say. Although private drivers may feel some pain at the petrol pump, most buses and trucks run on diesel, which Russia has a surplus of. The military, which largely uses diesel fuel, also is insulated from any shocks.

That does not mean the situation still could not deteriorate. Refineries that make petrol for Russia’s domestic market also make diesel and other products for export — a vital source of income amid heavy Western sanctions.

Industry observers say Ukraine's drones target key refinery equipment, including the distillation column that separates incoming crude oil into other products, including petrol, diesel, fuel for ships and asphalt. If damaged, it must be repaired or replaced for the refinery to function. Repairs could be difficult if foreign parts are needed.

The petrol crisis is expected to ease by late September as demand subsides and the annual summer maintenance for many refineries is finished.

Still, the crisis highlights a vulnerability on the home front that has the potential to be exploited further as drone warfare evolves.