Russian wholesale gasoline prices are soaring to record levels following a series of Ukrainian drone strikes on critical refinery infrastructure. Analysts warn that Russia is facing fuel shortages in the coming weeks, Meduza reported on August 21.

On August 18, the national index for AI-92 gasoline on the St Petersburg International Mercantile Exchange rose 1.33% to RUB71,516 ($885) per tonne, breaking the previous record set in September 2023. AI-95 climbed 2.19% to RUB80,430 ($995), just below its all-time high of RUB80,500 ($997) recorded on August 12—marking the fifth record this month alone.

The sharp rise in prices is directly linked to Ukraine’s escalating drone campaign against Russian oil infrastructure. After Russia launched a devastating missile barrage in May, Ukraine has answered by increasingly targeting strategic targets inside Russia using its evolving long-range drones, which are becoming increasingly effective.

In one of the most spectacular attacks to date, Ukraine hit the Druzhba oil pipeline pumping stations in March and again last week, temporarily knocking out all piped oil deliveries to Hungary.

Supplies of petrol and diesel are already under pressure thanks to the demand for fuel by Russia’s military and the war in Ukraine, and the government has introduced export bans on several occasions. Fuel exports were banned in September last year due to spiking military demand. And Russia faced another fuel shortage in September 2023.

Refineries hit

Oil refineries are high on Kyiv’s target list. Since early August, drones have hit Rosneft’s Ryazan, Novokuibyshevsk and Saratov refineries, as well as facilities in Krasnodar Krai, the Komi Republic, and the Bryansk region, according to Kommersant and The Bell.

In the past week alone, facilities with a combined capacity of 1.5mn barrels per day were attacked, S&P Global reported. “The situation is especially dire because it coincides with peak seasonal demand from summer travel and the upcoming harvest,” an industry source told Kommersant, adding that independent market players have “almost no reserves left”.

Spiking petrol prices come on top of already high inflation, which was running at 8.8% in July and is increasingly hitting consumers in the pocket.

While refinery operators have not disclosed damage assessments, Reuters sources estimate that repairs at Ryazan and Novokuibyshevsk could take around one month. The Bell reported significant damage at Saratov, with the three refineries together representing around 14% of Russia’s refining capacity.

In response, the Russian government imposed export restrictions in late July on companies producing more than 1mn tonnes of gasoline annually. Deputy Prime Minister Alexander Novak announced on August 14 that the Energy Ministry’s proposal to extend the embargo through September had been approved.

However, The Bell noted that “the volumes lost to drone strikes far exceed Russia’s weekly gasoline exports (40,000–50,000 tonnes)”, casting doubt on the effectiveness of the measures. Kommersant reported that so far exports under intergovernmental agreements with “friendly” countries remain unaffected and the shortages remain a domestic problem.

Analysts are divided on when prices will ease. Analyst at BCS World of Investments, told Kommersant that prices “may already have reached a local peak” — assuming no new disruptions. Analysts at NEFT Research expects prices to remain high until at least October, when seasonal demand subsides.

Reuters sources warned that a physical shortage could hit parts of Russia in August or September, with some regions already experiencing supply stress. Independent fuel retailers are particularly vulnerable, as limited stock and price pressures could force smaller players out of the market.

According to The Bell, potential government interventions include a full export ban, increasing the minimum quota of gasoline sold on the exchange from 15% to 17%, or allowing Belarusian fuel to enter the Russian market.