Russia's Strategic Diesel Ban Sends European Prices Soaring

Russia has successfully moved its wholesale gasoline prices down with the implementation of its diesel export ban.

Russia moved to ban the exportation of diesel starting in October, which was to include all loadings from its Black and Baltic Sea ports. The ban was part of a government effort to stabilize domestic fuel prices. Russia’s ban on diesel exports was expected to further tighten an already tight global distillate market ahead of winter—a time when demand is expected to rise. Europe’s diesel prices rose after the ban was announced. 

But in Russia, diesel prices fell 4.97% on the day on Monday, to 59,130 roubles per ton, according to St. Petersburg International Mercantile Exchange (SPIMEX). Russia’s Deputy Prime Minister Alexander Novak said over the weekend that its fuel export ban was already starting to produce results, achieving lower gasoline and diesel prices. Wholesale gasoline Ai-92 was down 1.94% on Monday alone, at 56,945 roubles per tonne—or $576.45 per ton. 

Russia’s ban is in line with its policy to control the price of domestic gasoline through caps and damper payments to in-country refiners to offset the difference between fuel prices at home vs. what they could get from exporting to the international market. 

Russia’s self-imposed export ban on fuel is ironic in that the European Union moved to halt Russian seaborne imports of the fuel earlier this year to curb Russia’s revenue from crude oil and its products in an effort to sap its war chest. European prices of fuel rose after its own ban on Russian fuel imports, and now they have gone higher again as a result of Russia’s own ban. 

While crude oil, natural gas, and crude product sales make up 45% of Russia’s budget, it has become critical for the government to restrict fuel exports to curb price rises for its population at the pump.

By Julianne Geiger for Oilprice.com

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