Almost two weeks after adopting this drastic measure, Russia is significantly easing its diesel export ban, arguing that it will alleviate its own shortage. The executive announced in a statement that oil companies will be allowed to send fuel to ports for sale abroad as long as “the manufacturer supplies the domestic market with at least 50% of the diesel produced.” The measure represents important price relief in the rest of the world and especially in the EU: although Russian fuels have no longer been able to be imported directly since the beginning of the year, any move that disrupted the global market fell particularly hard on the EU Twenty-Seven, large net buyers of diesel.
The Eurasian country, one of the world’s largest oil and derivatives producers, has recently been in an energy crisis due to the collapse of the national currency, the ruble, and the rise in the price of barrels. This is largely due to its own policies, which are in coordination with Saudi Arabia restricted pumping operations. According to the Kremlin, in this context, its oil companies, stretched to the limit to finance the invasion of Ukraine, would have preferred to sell at a higher price.
Since the spring, Russian rural residents have been complaining that the next harvests are in danger due to fuel shortages and rising prices. Vladimir Putin ordered his government to take action, banning the export of gasoline and diesel on September 21. According to his calculations, wholesale prices have already been reduced in 81 regions of the country, and Deputy Prime Minister Alexander Novak has instructed companies to pass on their cuts to consumers. Internal prices for petrol and diesel have since fallen by 16% and 21% respectively.
Blaming this energy crisis on the bad faith of suppliers, the Kremlin has now introduced another condition for lifting the veto “to prevent resellers from purchasing fuel in advance and exporting it after the current restrictions are lifted”: a set of 50,000 rubles per ton about 500 euros for suppliers of petroleum products that do not produce themselves.
Two week seizure
In the beginning it was the war that shook all the pillars of the energy markets and destroyed all previous plans: the energy world in Europe, it was rightly said, would never be the same again. Almost a year later, the EU ban on fuel purchases from Russia (petrol, kerosene and especially diesel, the mother of all battles) caused the temperature on the market to rise by a few degrees again. There have been two moves by Moscow in recent weeks – the veto on car fuel exports and the cut in oil supplies agreed with Riyadh – that have put European motorists in their umpteenth predicament.
As of this week, the price of diesel has now accumulated three months of continuous increases at Spanish pumps and is at the same level as a year ago, when governments were preparing for their most difficult winter and the controversy and regression were still active. Bonus of 20 cents per liter.
The Kremlin’s ban on diesel exports – from the world’s fourth-largest exporter and first in Europe – had no direct impact on the EU, where Russian fuel has been banned since early February. But it is indirect: the less fuel there is on the world market – and Russia, pay attention, has put a million barrels of diesel into circulation every day, which is equivalent to German consumption – the higher the premium that the EU has to pay, if they take care of themselves. in the Middle East or India, where they will fill the void left by the Eurasian giant.
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Added to the Russian veto on exports, which virtually no one expected, was the clamp that two strange partners, Russia and Saudi Arabia, have been applying to the oil market for months. The repeated supply cuts pushed crude oil close to $100 a barrel in late September, although the market has eased in recent days. The impact on prices is particularly pronounced in countries such as Spain, where virtually all goods transport (96%) is carried out by truck and the impact is multiplied. Also inflation, which has just started to ease, further complicating the already difficult Rubik’s Cube facing central banks. The calendar didn’t help either: on the threshold of the cold season in the northern hemisphere, a time of maximum diesel consumption, when the transport of goods and travelers is accompanied by heaters that still run on this fuel.
Diesel shipments from Russia’s Baltic Sea port of Primorsk had fallen by half since the Kremlin announced the veto last week, according to London-based energy information company Vortexa. According to Bloomberg, a sign of the “potential disruption” that the Russian ban could cause on a global scale and particularly in Europe.
The ruble at its lowest level
Although Moscow hid behind internal shortages and the urgent need to avoid greater damage to its farmers, who need both diesel and food to harvest their winter crops, the reality was stark. The devaluation of the ruble reduced the incentive for oil companies to sell diesel in the country instead of exporting it. The veto was the government’s only possible instrument to ensure domestic supplies in the short term. And a way to kill two birds with one stone: At the same time, it hits an EU that was addicted to natural gas and diesel until the war.
With the currency sinking – the ruble hit a seven-week low this Friday – Moscow could not afford to close off this access to foreign currencies forever. “We think it will take a month or six weeks at most,” predicted Jorge León, senior vice president and head of oil analysis at Norwegian consultancy Rystad Energy, a few days ago. In the end it was significantly less: just over two weeks.
Fishing in the turbulent river
If this energy crisis has made anything clear, it is that the sweat and tears of some are the days of wine and roses for others. Oman, Kuwait and Bahrain have taken the lead in refining their production and exporting it to the Old Continent to fill the gap in Russia. The first two have just commissioned their new joint Duqm refinery, which will be 100% operational by early next year. A relief for a diesel-thirsty Europe and a major setback for its own economy. For its part, Bahrain is pressing ahead with months to complete the expansion of the almost ninety-year-old Sitra refinery, a plant that will almost double its capacity to convert crude oil into diesel and kerosene that meets strict EU standards.
Despite this progress, just before Russia made another breakthrough, the International Energy Agency (IEA) warned of the difficulties faced by global refineries in meeting “growing demand, particularly for distillates”. [diésel y queroseno]“. He added that refining plants in Asia and Europe have been operating at “much lower” levels in recent months than last year.
The situation of the last few weeks has also been a unique opportunity – another – for the major European oil companies, owners of large crude oil reserves outside the EU and the largest refineries on EU soil. In both cases, they have everything to gain: because of the escalation in the price of crude oil and because, after a period of relative moderation in their refining margins, scarcity is again a better ally to increase their profits in this phase of the value chain, the most profitable so far in the energy crisis. In Spain, Repsol just announced that its refineries’ profit margin more than doubled to $13.5 a barrel in the third quarter of the year. However, it is still a long way from the almost $19 per barrel reached between October and December last year.
An internal crisis has been brewing since the spring
The Russian energy crisis began in the spring, at the same time the price of the ruble began to fall again due to the sanctions-related costs of other currencies in the country. The lack of dollars and euros has led to the fact that at the beginning of the year the exchange rate of the Russian currency was around 60 rubles per euro or dollar and is currently exceeding the psychological limit of 100. And this, accompanied by the rise in oil prices on the international market and the production cuts approved by the Kremlin to force this situation, pushed Russian companies to export their products to earn more income.
The fuel shortage was passed on to Russian consumers. Fuel prices have skyrocketed, and in the agricultural regions of southern Russia there have been warnings since August that winter harvests would be at risk unless fuel was cheaper. The government, for its part, has initiated several antitrust proceedings against independent gas stations and fuel depots. Likewise, Novak this week ordered the Agriculture Ministry and local authorities to monitor the profit margins of farmers’ suppliers.
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