Non-Market Methods: How the Government is Combatting the Fuel Crisis

The intense struggle of Russian authorities against the fuel crisis has persisted for several months. On April 2, 2026, just before the seasonal spike in fuel prices, the government imposed a full ban on gasoline exports until the end of July, with exceptions for deliveries under intergovernmental agreements. This decision was justified by rising global oil and petroleum product prices due to the conflict in the Persian Gulf. At that time, the price increase was temporarily halted. By April 2, the price of a ton of AI-92 gasoline fell by 4.8% from its peak of 68,504 rubles recorded on March 24 to 65,196 rubles, while the price of AI-95 dropped by 3.4% to 70,031 rubles compared to its maximum of 77,483 rubles on March 24.

However, the effects of the export ban did not last long. Supply decreased due to drone attacks on refineries. By May, according to Rosstat, which does not provide absolute production figures, output of petroleum products fell by 13.5% on a monthly basis. Producer prices for AI-92 increased by 0.8% in May compared to April and by 13.2% year-on-year. The price of AI-95 rose by 0.8% month-on-month and by 12.7% year-on-year.

In retail, the weekly increase in the price of AI-92 accelerated. From April 27 to May 4, the increase was 0.1%, raising the price from 63.53 rubles to 63.59 rubles, and from May 26 to June 1, it jumped to 0.4%, with prices rising from 63.89 rubles to 64.17 rubles. The price of AI-95 also increased: from 0.1% from late April to May 4 (from 68.99 rubles per liter to 69.01 rubles) to 0.5% from May 26 to June 1 (from 69.46 rubles per liter to 69.78 rubles).

During the week of June 16-22, the price of AI-92 rose by 3.2%, from 65.41 rubles to 67.54 rubles, while AI-95 increased by 2.9%, from 71.11 to 73.2 rubles. However, during the week of June 23-29, the pace of increases slowed: retail prices for AI-92 grew by 1.7%, reaching 68.76 rubles per liter, while the price of AI-95 gasoline rose by 1.6%, hitting 74.38 rubles per liter.

The rise in prices stemmed from a shortage of gasoline and diesel that emerged in many Russian regions since late May. Long queues formed at gas stations, prompting local authorities across the country to impose fuel sales restrictions. On June 28, President Vladimir Putin publicly acknowledged the fuel deficit, labeling it as "non-critical."

Lower Quality Gasoline

On July 8, the government prohibited diesel fuel exports, announced Deputy Prime Minister Alexander Novak during a meeting led by Putin with government members regarding the fuel market situation. Novak noted that in July, Russia would begin importing petroleum products and that the government had postponed several refinery repairs.

Previously, on June 24, the State Duma passed in its final reading the government-sponsored bill amending the Tax Code. The resolution included a comprehensive set of measures aimed at overcoming the fuel deficit. On July 4, the law was signed by Vladimir Putin.

The bill allows producers to mix straight-run gasoline (naphtha) and other components to produce high-octane fuel. Gasoline produced in this manner must meet Euro-3 standards and is equated with high-quality Euro-5 fuels; those that produce it will qualify for benefits alongside other suppliers, despite its sulfur content being 15 times higher than Euro-5—150 mg per kilogram of fuel.

On July 2, Prime Minister Mikhail Mishustin signed a resolution permitting refineries and oil depots to produce Euro-3 gasoline and diesel for the domestic market until the end of 2026.

The beneficiaries of the lowered gasoline quality standards could be small refineries, says Sergey Selin, director of market analytics at the "Siala" agency. He explains that the sulfur is removed from petroleum products at hydrocracking installations, which are present in large refineries that require significant volumes: from hundreds of thousands to over a million tons of gasoline annually. Such installations are absent in small refineries in northern Russia and even in larger ones in the south that were built decades ago. They can only produce Euro-3. "This fuel works perfectly for equipment on-site," Selin says.

Maxim Shevyrenkov, head of the Center for Raw Material Market Analysis at the Institute of Energy and Finance (IEF), believes that reducing gasoline quality standards, coupled with limiting fuel distribution at gas stations, will effectively weaken the deficit, especially in regions with relatively small fuel storage capacities. The negative environmental impact of using such fuel will be relatively minor, he adds.

A straightforward adjustment of production processes at refineries allows for greater production of Euro-3 gasoline, notes expert Stanislav Mitrakovich from the Financial University and the National Energy Security Fund. "This fuel is not of the highest quality and not the most beneficial for ecology and modern engines, but overall it works just fine," he affirms.

Most likely, the majority of Euro-3 gasoline will be sold where it is produced—namely, in the northern parts of the country and in the Krasnodar Territory, Selin notes. He emphasizes that the volumes involved are not significant, and during the peak consumption season, there might not be enough of this gasoline for other regions. The production of such fuel is not a panacea but merely a temporary stopgap for the shortage issue. Many engines currently in use were designed with Euro-3 in mind, so it is unlikely to cause them harm, the expert continues.

However, auto service centers are already witnessing an increase in the number of affected vehicles. The number of requests in June alone rose by approximately 10-15%, reported Michael Kozhanov, co-owner of the auto service aggregator VR Auto to Forbes. He mentioned that all categories of motorists are affected, from owners of luxury brands to holders of domestic and Chinese models. "Most modern vehicles are adapted to Euro-5 fuel, but in practice, they are increasingly filled with Euro-4 or Euro-3, which leads to failures in engine components, filters, spark plugs, and injectors. This is a problem, [the number of requests] is increasing and will continue to grow; not all vehicles react immediately. Malfunctions in the fuel injection system may take some time to manifest after several poor-quality fill-ups," Kozhanov explains.

Support for Refineries

Allowing the production of Euro-3 fuels will partially address the shortage and assist small producers in ramping up gasoline output. Large enterprises have also been taken into account. The agreements on refinery modernization have been extended until December 31. This applies to those plants that entered into modernization agreements with the Ministry of Energy before June 1, 2019, worth at least 60 billion rubles, and which were supposed to launch new capacities by January 1, 2026, but failed to do so.

Back in 2019, the Ministry of Energy signed several agreements with major oil companies granting them the right to receive refunds on oil raw materials if they meet one of two conditions: either the share of grade 5 gasoline must not be less than 10% of processing volume, or investments in modernization must exceed 60 billion rubles from July 1, 2014, to January 1, 2026. The new law increases the minimum investment volume for modernization from 60 billion to 100 billion rubles.

Oil companies that have entered into modernization agreements with the Ministry of Energy receive a tax deduction on oil raw materials, termed as "reverse excise," says Sergey Tereshkin, CEO of the Open Oil Market commodity marketplace. Essentially, this is a subsidy calculated according to a complex formula based on the volume of raw material processing. Since 2021, an investment surcharge—30% of the reverse excise—has been added. However, only those companies that invested at least 60 billion rubles in new processing installations could benefit from this. The threshold has now been raised to 100 billion rubles. It is possible that funds dedicated to restoring technical installations that underwent unscheduled repairs in recent months will be factored into this amount, Tereshkin indicates.

The reverse excise, Tereshkin points out, is typically received by large refineries that are part of vertically integrated oil companies (VIOCs) capable of investing in secondary oil processing installations. In 2025, such refineries received 2.39 trillion rubles, almost 1.3 trillion rubles of which was from reverse excise and 170 billion rubles from the investment surcharge, Tereshkin highlights.

Importers Not Forgotten

Another measure to overcome the deficit has been importation. On July 1, Reuters, estimating summer gasoline consumption in Russia at 110,000 tons per day, reported that at least 60,000 tons of gasoline had already been sent from India to Russia. Kazakhstan, according to agency sources, has agreed to supply Russia with 50,000 tons of gasoline in July and August. Reuters further reported that Moscow plans to import 400,000 tons of gasoline monthly from various countries, including Belarus, which, according to agency estimates, has tripled its supplies to Russia in the first half of June to 70,000 tons compared to the same period in May.

To boost imports, the new law will, for the first time, provide damping payments to companies selling fuel produced abroad in Russia. The government will determine the list of vendors.

The damping mechanism compensates the difference in fuel prices between the domestic and foreign markets for producers and importers. If the export price of fuel is higher than the domestic price, making exports more profitable than supplying the domestic market, the government compensates producers for the difference. If the opposite is true, companies must pay into the budget. Authorities also compensate importers for the discrepancy between external prices and domestic market prices.

The damping for producers is calculated from the difference between the actual external price and the fixed domestic price. This year, the fixed internal threshold for AI-92 gasoline is set at 62,300 rubles per ton, while for diesel fuel, it is 58,950 rubles. This same threshold will be applied to importers, with the only difference being that actual prices from the EAEU will be used as the external indicator, Tereshkin from Open Oil Market explains.

For gasoline produced in other countries, the law states that the amount of damping payments will be determined by the Federal Antimonopoly Service (FAS) based on the indicative price of AI-92 gasoline in India and the cost of transporting it to Russia. According to Tereshkin, the price of gasoline on the Indian market is unlikely to be lower than the Russian price, given that global prices have yet to return to February 2026 levels. According to FAS data, the average price of the export alternative for AI-92 gasoline has risen from 57,976 rubles per ton in February to 98,897 rubles per ton in May 2026. This figure is calculated based on European prices, Tereshkin warns, but it is doubtful that calculations based on Asian prices will change the situation significantly.

For fuel importers from the Eurasian Economic Union (EAEU), which includes Russia, Belarus, Kazakhstan, Kyrgyzstan, and Armenia, the compensation ratio for imported fuel is higher than for Russian fuel producers: 0.9 versus 0.68. Furthermore, payments will be introduced retroactively from June 1, 2026. From this date, the volume of imported gasoline from Belarus and Kazakhstan will be multiplied by 0.9 for calculation purposes, meaning the higher the import volume, the more significant the damping payment will be, Tereshkin from Open Oil Market clarifies.

From the Exchange to Gas Stations

Another measure adopted by the government has been to reduce the mandatory sales quota of gasoline on exchange markets from 15% to 10% of production volumes. This norm will be effective from July 1 to September 30, 2026.

The reduction in quotas, according to Shevyrenkov from IEF, will allow major oil companies to use fuel that was not sent to the exchange at their own gas stations.

As the VIOCs face shortages of gasoline to meet their network demands, a decision was made to sacrifice some independent gas stations that source gasoline from the exchange, Selin adds.

Tereshkin from Open Oil Market views the reduction of exchange sales quotas as an incorrect measure. He believes it will make gasoline and diesel less accessible to independent gas stations, especially in regions lacking sufficient numbers of large company-owned gas stations.

The FAS has also engaged in addressing fuel issues, with its Moscow regional office announcing on July 6 that it had initiated cases against six independent market participants who simultaneously raised their gasoline and diesel prices at their gas station networks. The Orenburg office of the agency launched analogous cases against three independent fuel market participants.

All A Bit Too Late

As of now, the implemented measures have yielded no significant results. According to the latest Rosstat data, from June 29 to July 6, the price growth for gasoline accelerated. For AI-92, it rose by 2% compared to the previous week, reaching 70.21 rubles per liter; for AI-95, it increased by 2.3% to 76.19 rubles per liter, and diesel fuel saw a price rise of 3.4%, reaching 87.76 rubles.

This time, Rosstat did not specify which region saw the highest price spikes. Last week, it was Sevastopol, where gasoline prices jumped by 30%. However, on July 8, the head of Sevastopol, Mikhail Razvozhaev, informed Putin about a sharp rise in the price of AI-95 gasoline to 197 rubles per liter.

Stimulating fuel imports should have been prioritized a couple of months ago when the risk of unplanned technological downtimes at refineries was already evident, Tereshkin from Open Oil Market argues. That proactive approach might have prevented long queues at filling stations, he concludes.

Considering the current market situation, it might now be the right time to transition to free pricing on the St. Petersburg exchange and at the gas stations themselves and abandon the damping mechanism, Selin from "Siala" suggests. This could motivate commercial fuel imports and quickly address the domestic market shortfall, he believes.