Streetwise Professor

October 11, 2011

Out of Gas in the World’s Biggest Oil Producing Nation

Filed under: Commodities,Energy,Politics,Russia — The Professor @ 2:08 pm

Two related stories.  The first: unofficial price controls on refined petroleum products in the runup to the Russian elections:

Russian authorities have unofficially reined in retail fuel prices, a sensitive issue for motorists before key elections, traders and sources in companies said Thursday.

The oil companies already had effectively put a lid on gasoline prices at pumping stations since mid-August, fearing a backlash from the government before the general elections in December and presidential poll in March.

Salesmen are now talking about direct verbal orders from the government not to increase prices.

“There won’t be any moves before the elections, although there are no written directives from Moscow,” said a worker at a TNK-BP retail station in Saratov, 880 kilometers southeast of Moscow.

“We were about to increase the price, but we were told to draw in our horns. ‘Are you crazy? There are elections coming!’ they told us,” said an official with LUKoil in Volgograd.

Retail prices have flatlined across the country despite skyrocketing wholesale prices for petroleum products.

After anti-monopoly regulators slapped companies with hundreds of millions of dollars of fines for expensive fuel over the past year, retail stations have been wary of raising prices, and their margins have been squeezed almost to nothing.

The second story: shortages of jet fuel:

Russian traders are alarmed at the sudden disappearance of aviation fuel from the market.

They say a hike in prices is imminent, with a fuel deficit likely before the end of October.

The main factor behind the deficit is thought to be the growing number of passengers using airlines in Russia, whereas the oil refineries around Moscow and Moscow regions ceased operating at full capacity. Additionally, in September, the Defense Ministry made a large order for aviation fuel.

Uhm, don’t believe the explanations given in the quoted bit, except to draw a direct line between the below-capacity operations of refiners, and the first story about unofficial price controls.  Although the price control article relates to motor fuel, it is highly likely that (a) there are also unofficial price controls on aviation fuel,  and/or (b) since gasoline and distillates are produced in relatively constant proportions, cutbacks in refining runs driven by the unprofitability of selling motor fuel at sub-competitive prices are also causing reductions in aviation fuel output.

This also adds credence to the earlier conjectures that the KHL air crash was the result of poor quality fuel, because reductions in quality are another predictably consequence of price controls.

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  1. Different gas but Tymeshenko got seven years for signing the Gazprom contract. As one of her main accusers was leaving the court room her husband yelled at him-Your turn will come.

    I have first hand knowledge of yanukovich, Tymoshenko, and Yanukovich’s organizations paying people from rural areas to get on a bus in the morning and traveli to Kiev to “demonstrate” for the daybooks on Kreschatik. It looks as though this has found it’s way to the Occupy demonstrations.

    I can’t imagine a more failed state than Ukraine in Europe but then I have never been to Byelorussian.

    Comment by pahoben — October 11, 2011 @ 9:02 pm

  2. The Ukrainians were probably just copying Nancy Pelosi.

    Comment by La Russophobe — October 12, 2011 @ 12:04 am

  3. I lived in Ukraine for 15 months. It’s a sad place. As for Russia, sounds like a Democrat’s paradise.

    Comment by Howard Roark — October 12, 2011 @ 1:11 am

  4. Energy superpower, my ass.

    Comment by So? — October 12, 2011 @ 1:14 am

  5. Igor Yurgens says Kremlin has understated capital flight for 2011 by almost half, real number is around $60 billion

    Comment by La Russophobe — October 12, 2011 @ 6:09 am

  6. How long before Russians try vodka in the tank of a passenger jet?

    Comment by La Russophobe — October 12, 2011 @ 6:11 am

  7. So if OCW are really astro-turfers, what does that make the Tea Party?

    A hologram?

    Comment by Sublime Oblivion — October 13, 2011 @ 1:17 am

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