Pressure at the Pump: Ukraine Resumes Strikes on Russian Oil Refineries

Ukraine resumed its drone strikes on Russian oil refineries last weekend, the latest salvo in a nearly 18-month military campaign to crimp Russian fuel supplies. The attacks are expected to further increase Russian retail gasoline prices, which are already nearing record highs, though not to a politically untenable level for President Putin. However, the pump price escalation could serve as a contributor to rising pressure on Putin, in conjunction with looming new measures threatened by President Trump, to compel Putin to end his war on Ukraine.

Q1: Which Russian refineries were targeted by Ukrainian drone strikes?

A1: On August 2, Ukrainian drones targeted Rosneft’s Novokuibyshevsk refinery in the Samara region. Its primary crude oil processing unit, responsible for 80 percent of the refinery’s output, was damaged and is expected to remain offline for at least one month. Novokuibyshevsk is an important supplier of gasoline to southwestern Russian regions, including Rostov and Krasnodar Krai, as well as Crimea and other Russian-occupied areas of Ukraine.

Also on August 2, Rosneft’s Ryazan refinery was struck by Ukrainian drones; two of its crude processing units were damaged. Rosneft subsequently notified Russian oil pipeline operator Transneft that crude intake in August would be cut by about 60 percent versus its planned program. Ryazan is an important supplier of gasoline to central Russian regions, including Moscow.

Q2: How will this affect the Russian gasoline market?

A2: The damage to these refineries will exacerbate tight Russian gasoline market conditions that have already sent retail prices to near record-high levels around ₽62 per liter for regular grade ($2.93 per gallon). Prices were high even before the latest attacks because of peak summer demand season, low inventories at the wholesale distribution level, and a refining system running below full capacity due to heavier-than-normal maintenance activities for this time of year.

Russia is highly sensitive to gasoline prices; preventing sharp spikes is important for Putin’s popularity and preventing domestic discontent. The pre-attack tight market and high price environment led Moscow to reimpose a seasonal ban on gasoline exports on August 1, just prior to the recent refinery attacks.

Q3: What effects are anticipated for the oil market and the Russian oil industry?

A3: One option to deal with the excess crude that will no longer be processed in August due to the refinery disruptions is to store it within the Transneft system temporarily. Its approximately 40-million-ton line fill can likely accommodate another 2 million tons of crude, less than the 800,000-ton overhang expected in August on account of the disruptions. But there are risks to this approach. That spare storage capacity will be needed starting in September when seasonal refinery maintenance causes refineries to run at reduced rates. Moreover, the current disruptions could last beyond August, and Russia’s other refineries remain vulnerable to drone attacks that could exacerbate the crude oil overhang. For those reasons, Moscow may simply choose to export a few more crude cargoes during August—bearish for Russian crude prices and beneficial for India and China.

On the refined product side, Russia will likely export a bit less diesel, naphtha, and fuel oil in August than previously expected. This is marginally supportive for prices of those fuels within their principal import markets: Brazil, Asia-Pacific, and the Mideast Gulf, respectively.

Q4: What is the significance of the Western campaign to pressure Putin to end the war?

A4: By itself, the reduction in gasoline production from the recent refinery attacks won’t move the needle on Putin’s grip on power and his willingness to end his war on Ukraine. However, in the context of looming new punishments from Washington, the gasoline price spike could serve as one contributor to a cumulative ratcheting of pressure on Putin.

On July 31, President Trump announced he was accelerating a deadline for Putin to end the war against Ukraine to August 8 or else face punishments, expected to be sanctions and/or tariffs against Russia’s oil customers—a move that would drive Russian export prices and revenues lower. CSIS has recently proposed ways to improve the sanctions program and a new surcharge mechanism to reduce Russian oil revenues.

Additional Ukrainian attacks on other Russian refineries, such as the Kstovo facility near Nizhny Novgorod, the Ufa refinery complex, or the other refineries in the Samara cluster (all of which have previously been struck), would further exacerbate Russia’s gasoline supply crunch and high price environment. Moscow would have few offsets to mitigate such a widening of damage to its fuel production capacity. It could release gasoline inventories held in the state reserve, but gasoline constitutes a small portion of that inventory pool that’s heavily weighted toward diesel fuel. It is estimated that the reserve holds around half a million tons of gasoline, equivalent to just five days of domestic consumption.

Clayton Seigle is a senior fellow in the Energy Security and Climate Change Program and holds the James R. Schlesinger Chair in Energy and Geopolitics at the Center for Strategic and International Studies in Washington, D.C.