Ukraine's strikes exacerbate Russian Fuel Crisis. Kremlin scrambles

Gasoline prices in Russia are on the rise due to the effective impact of Ukrainian attacks on refineries. The looming threat of gasoline shortages has compelled both the Kremlin and refinery operators to explore various strategies for boosting production. However, a significant challenge arises as the components needed for fuel production also originate from the targeted plants.

The risk of gasoline scarcity amidst refinery attacks prompts the Kremlin and companies to look into multiple production enhancement methods, reports Kommiersant.

In response, Russian facilities are curbing the production of so-called aromatic hydrocarbons, instead redirecting raw materials straight to gasoline production. This shift has led to a spike in the cost of toluene, an organic solvent employed as a high-octane additive in motor fuels.

According to Kommiersant, more drastic measures are under consideration, such as partly reverting to the output of Euro-3 gasoline and revoking the prohibition on methyl-aniline, a practical yet environmentally detrimental octane enhancer banned since 2016.

Experts consulted on these proposals argue that implementation would be overly challenging, suggesting that the situation has not reached a dire level yet.

The fuel crisis in Russia is deepening. Russians voiced complaints last fall regarding exceptionally high fuel prices, by their standards, at stations. To mitigate the situation, the Kremlin imposed a temporary export ban on gasoline and diesel to ensure domestic market supply. Although the restriction was momentarily relaxed, it was fully reinstated for gasoline starting March 1.

Russia faces such a severe fuel dilemma that it is seeking assistance from Kazakhstan. According to Reuters, Kazakhstan has been asked to prepare 220,462 pounds (100,000 metric tons) of fuel in anticipation of potential shortages. This plea is directly attributed to the Ukrainian assaults on refineries, which diminished Putin's regime's production capacity.

Turning our focus back to toluene, its increased usage to boost the octane rating of gasoline has pushed up costs. Neft Research reveals that in 2023, Russia's toluene production stood at 352,740 pounds (320,000 metric tons), with consumption at 342,638 pounds (310,000 metric tons). Of this, 220,462 pounds (200,000 metric tons) were allocated as a gasoline additive (with toluene constituting an average share of 0.5 per cent in gasoline - as pointed out by Kommiersant, yet its effective use requires additional components).

This scenario is complicated by the fact that the production of both toluene and gasoline relies on similar components, which saw their production capacities decimated in March owing to Ukrainian drone strikes on refineries.

The principal producers of this fraction include Omsk Refinery (66,139 pounds (60,000 metric tons)), Ufaneftekhim (198,416 pounds (90,000 metric tons)), Slavneft-YANOS (44,092 pounds (40,000 metric tons)), as well as LUKOIL-Permnefteorgsintez (33,069 pounds (30,000 metric tons)) and Gazprom neftiechim Salavat (27,558 pounds (25,000 metric tons)).

For weeks, Ukrainians have been targeting Russian refineries with drones. Specifically, in March, HUR and SBU confirmed strikes on facilities located in Sloviansk within the Krasnodar Territory, Novoshakhtinsk in the Rostov region, and others in Ryazan, Kstovo in Nizhny Novgorod region, and Kirishi in Leningrad region. Both Russian and Ukrainian media outlets have also covered attacks in Syzran and Novokuibyshevsk in the Samara region and a fire near a thermal power station in Petersburg.

In early April, Reuters estimated that drone attacks had knocked out about 4.6 million metric tons of Russian refinery processing capacity in the first quarter of the year, equating to roughly 370,500 barrels per day, or about 7 percent of the country's total refinery output. Other estimates suggest a reduction of up to 10 percent.