Russia’s banning of petroleum product exports will not last long and any impacts on prices will be short lived.
Russia is having trouble with its war on Ukraine. Repercussions are reverberating throughout Russian society and the Russian economy. Inflation is a problem in Russia just like in many other countries in the world, but the Soviets have an advantage over most: they are energy independent.
Russia is a top producer of crude oil, and it is one of the world’s largest refiners of crude oil as well. This is why Russia is consistently one of the world’s top exporters of both crude oil and the refined products made from crude oil.
Because Russia is also one of the world’s largest refiners of crude oil, it is naturally one of the world’s foremost exporters of Distillates such as diesel fuel, jet fuel, fuel oil (called gasoil in Russia), and bunker fuel (the heavy fuel oil used in ocean going vessels). Gasoline is also a refined product, but Russia is lesser known for its gasoline exports. It is a simple matter for Russia to withhold refined product exports until its own domestic supplies can be replenished, which should significantly ease inflationary pressures related to the high price of fuel.
Conversely, the widely reported ban on Russian product exports has had an immediate upward effect on refined product prices, especially in European markets, but Russia can’t withhold exports for long. Once domestic Russian markets are replenished with refined fuels, the powers-that-be will open the spigots again and distillate and gasoline exports will begin to flow. At nearly 1 million barrels of product exports per day it won’t take long for Russia’s domestic storage facilities to hit capacity which will necessitate the reestablishment of exports again in order to keep the Russian energy system running – and to keep foreign currency reserves flowing into Russian coffers.
Rest assured, Putin wants a smooth ride as he approaches the upcoming March 2024 Presidential election in Russia, and lower domestic fuel prices will go a long way towards appeasing the Russian populace.
The September 21, 2023 temporary ban on product exports will be just what it was announced to be – temporary. The world need not worry that Russia is withholding fuels as a weapon against its foes; Russia needs to export fuels and it will begin to do so again as soon as domestic supplies are replenished, which should not take more than a few weeks. Top importing countries like China, Turkey, Saudi Arabia, the UAE
UAE
Russia will not, and most likely cannot, use refined crude oil products as a weapon in its war on Ukraine, the export ban will be lifted well ahead of winter heating demand.
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