Russia Has Oil but Is Running Short of Petrol

Russia is once again facing a severe petrol shortage, and this time the scale of the problem is becoming increasingly difficult to conceal through administrative restrictions and assurances that the domestic market remains stable. At the end of August, Russian petrol production fell to roughly 70% of domestic demand following a series of strikes on Russian oil refineries. According to Reuters, Russian refineries were producing around 80,000 tonnes of petrol a day, while summer demand stood at approximately 115,000 tonnes. That left a daily shortfall of about 35,000 tonnes.

For a country that remains one of the world's largest oil producers, the emergence of such a gap is particularly significant. Russia's problem is not a lack of crude oil. The problem is that crude must be processed into finished fuel, and this part of the energy system has become increasingly vulnerable to Ukrainian strikes. As a result, Russia has found itself in a paradoxical position: it continues to produce oil and export it abroad while simultaneously having to import petrol to supply its own consumers.

From exporting petroleum products to importing petrol

The first signs of the problem became visible earlier in the summer. In July, Russia began purchasing petrol by sea from India. Reuters reported at the time that at least 60,000 tonnes of Indian petrol had been shipped to Russia, while Moscow's plans envisaged importing up to 400,000 tonnes of petrol a month from various countries.

By August, the arrangement had become more visible. At least one shipment of Indian petrol had reached the Russian domestic market as Moscow sought to compensate for losses in domestic refining capacity.

The most revealing part of this development is the paradox behind it. India has become one of the largest buyers of Russian crude oil in recent years, benefiting from access to discounted supplies. Indian refineries process that crude into petrol, diesel and other petroleum products, some of which are then exported. Now, some of those refined products are being sent back to Russia.

Russia therefore faces a situation in which its own crude oil can leave the country, be processed in India and return as finished petrol. The issue is not that Russia has literally run out of oil. Its vulnerability lies in the infrastructure needed to turn that oil into the fuels required by its domestic economy.

Ukrainian strikes are hitting the critical link

This is why strikes on Russian refineries have an economic impact that goes well beyond damage to individual industrial facilities. Ukraine has increasingly sought to put pressure not only on Russia's ability to extract and export energy, but also on its ability to refine and distribute it.

At the end of August, major facilities in Perm, Nizhny Novgorod and Yaroslavl were among those affected by disruptions following new strikes. These incidents contributed to the latest fall in petrol production.

The timing is particularly damaging for Russia because summer traditionally brings higher fuel demand, including from road transport and agricultural activity. Each prolonged shutdown of a major refinery therefore comes at a time when the domestic market requires more petrol, making it harder for the system to absorb the loss of capacity.

A temporary disruption at one refinery can be managed. Repeated disruptions affecting several major facilities are a different problem. They reduce the spare capacity available to compensate for further outages and make the entire system more dependent on imports and government intervention.

Moscow is relying on administrative measures

The Russian government has responded primarily through administrative controls. Moscow has restricted petrol exports, while Reuters reported that the restrictions for several categories of exporters would remain in place until at least the end of January 2027. The authorities have also continued to consider restrictions on diesel exports.

Problems have also begun appearing at regional level. In some parts of Russia, restrictions on petrol sales and limits for individual buyers have returned as authorities try to prevent local shortages from worsening.

This is an important indicator of the nature of the problem. When a government has to restrict exports, arrange imports, redistribute fuel between regions and control sales of petrol, the market is no longer simply adjusting to a temporary imbalance between supply and demand. The state is increasingly having to manage scarcity.

Imports can buy time but cannot fix the underlying problem

Russia is attempting to compensate for the shortfall with supplies from Belarus and by importing petrol by sea from Asian countries. According to Reuters, petrol imports increased in August, but even after additional foreign supplies were brought in, Russia could cover only around 85% of domestic requirements.

This distinction matters. Imports can give Moscow additional time, but they do not address the reason for the shortage. If Russian refineries continue operating below normal capacity, the country will have to rely increasingly on foreign suppliers to meet domestic demand.

That creates additional costs, more complicated logistics and a new dependency on countries willing to sell refined products to Russia.

There is also an economic difference between exporting crude and importing finished fuel. Russia loses part of the value that could have been generated by processing its own oil domestically. Instead of turning crude into higher-value products at home and selling those products abroad, Russia may increasingly have to move crude out of the country and then buy back the refined product it needs.

India is at the centre of the paradox

India's role is particularly revealing because of the scale of its oil trade with Russia. Indian refiners have become major processors of Russian crude, helping transform discounted Russian oil into fuels and other petroleum products for global markets.

Russia is now becoming a buyer of the finished product.

This creates an almost circular energy flow: Russian crude goes to India, Indian refineries process it, and the resulting petrol can then travel back towards the Russian market to compensate for the loss of domestic refining capacity.

The significance of Indian petrol therefore goes beyond the volume of any individual shipment. It illustrates a change in the direction of the energy chain. A country that has long presented itself as an energy powerhouse and major exporter of petroleum products is increasingly having to look abroad for the fuel needed by its own economy.

The refinery problem is becoming an economic problem

A petrol shortage does not stop at filling stations. Fuel is essential for transport, agriculture, construction, logistics and industrial activity. A prolonged shortage therefore raises operating costs for businesses and can add further pressure to inflation.

Agriculture is particularly sensitive to fuel availability. Petrol and diesel are needed during planting and harvesting, while disruptions in supply can increase production costs and complicate the movement of agricultural goods.

The government also faces a growing administrative burden. The longer the shortage lasts, the more resources Moscow must devote to managing it: restricting exports, finding alternative supplies, redistributing fuel, controlling prices and preventing local shortages from spreading.

This creates a difficult choice for the Kremlin. If prices are allowed to respond freely to shortages, petrol becomes more expensive and adds to inflation. If prices are kept under administrative control, producers have less incentive to redirect fuel towards the domestic market, forcing the state to intervene even more heavily.

Russia's oil reserves cannot solve a refining crisis

The most important point is that Russia's enormous oil reserves do not protect it from shortages of finished fuel.

The situation exposes a vulnerability in Russia's highly integrated energy system. Extraction, refining, storage and distribution operate as interconnected parts of the same chain. If one of the critical links is repeatedly disrupted, access to abundant crude oil no longer guarantees a stable supply of fuel.

This is why the pressure on Russian refinery infrastructure matters to the wider economy. Moscow is being forced to spend resources not only on repairing damaged facilities but also on importing petrol and protecting the domestic market from shortages.

As long as Russia can buy petrol abroad, a complete supply collapse is unlikely. But the need to import petrol from India is already a significant indicator of how much the situation has changed.

Russia still has the oil. What it is increasingly struggling to guarantee is the ability to turn that oil into enough fuel for its own economy.