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

The intense struggle by Russian authorities against the fuel crisis has been ongoing for several months. On April 2, 2026, just ahead of the seasonal rise in fuel prices, the government imposed a complete ban on gasoline exports until the end of July, with exceptions for supplies under intergovernmental agreements. This decision was attributed to rising global oil and petroleum product prices due to the conflict in the Persian Gulf. At that time, the price increase was successfully curbed temporarily. By April 2, the cost of AI-92 dropped by 4.8% from a peak of 68,504 rubles registered on March 24, to 65,196 rubles, while AI-95 fell by 3.4% — to 70,031 rubles compared to the March 24 high of 77,483 rubles.

The effects of the export ban were short-lived, as supply diminished due to drone attacks on refineries. By May, according to Rosstat, there was a reported decrease of 13.5% in petroleum product output month-on-month, though it did not provide absolute figures. Producer prices for AI-92 rose by 0.8% in May compared to April, and by 13.2% compared to May 2025. AI-95 gasoline increased by 0.8% from the previous month and by 12.7% year-on-year.

At retail, the weekly price growth for AI-92 accelerated. From April 27 to May 4, it rose from 63.53 rubles to 63.59 rubles, and from May 26 to June 1, the rate increased to 0.4%, during which time its price climbed from 63.89 rubles to 64.17 rubles. AI-95 costs 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).

For the week of June 16 to June 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 from June 23 to June 29, price hikes slowed: retail prices for AI-92 increased by 1.7% to 68.76 rubles per liter, while AI-95 gasoline rose by 1.6% to 74.38 rubles per liter.

The price surge was attributed to a deficit of gasoline and diesel that emerged in many Russian regions since late May. Long queues formed at gas stations, and local authorities across the country began to restrict fuel sales. On June 28, President Vladimir Putin publicly acknowledged the fuel deficit, labeling it "non-critical."

Low-Quality Gasoline

On July 8, the government introduced a ban on diesel fuel exports, Deputy Prime Minister Alexander Novak announced during a meeting with Putin and government members concerning the fuel market situation. Novak indicated that Russia would start importing petroleum products in July, and moreover, the government postponed several refinery repairs to later dates.

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

The legislation permits producers to mix straight-run gasoline (naphtha) with other components to produce high-octane fuel. The resulting Euro-3 gasoline is equated with high-quality Euro-5 fuel, and those who manufacture it will receive benefits comparable to those of other suppliers, despite its sulfur content being 15 times higher than that of Euro-5, at 150 mg per kilogram of fuel.

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

The beneficiaries of the lower environmental class gasoline may be small refineries, explains Sergey Selin, Director of Market Analytics at the "Siala" agency. Sulfur is removed from petroleum products through hydrocracking units found in large refineries, as significant volumes are needed to ensure their operation: from hundreds of thousands to over a million tons of gasoline per year. Such installations are nonexistent in small northern refineries and even in the larger ones located in the south, which were built decades ago. They can only produce Euro-3. "This fuel works perfectly in local machinery," Selin says.

Maxim Shevyrenkov, Head of the Raw Materials Market Analysis Center at the Institute of Energy and Finance (IEF), believes that reducing the ecological class of gasoline, combined with limiting fuel supply at gas stations, will be an effective measure to alleviate the deficit, especially in regions with relatively small fuel storage capacities. The negative environmental impact from using such fuel will be relatively unnoticed, he argues.

The relatively simple adjustment of production processes at refineries enables the increased output of more Euro-3 gasoline, notes Stanislav Mitrakhovich, an expert at the Financial University and the National Energy Security Fund. "This fuel is of lower quality, not very environmentally friendly, and not the best for modern engines, but overall, it operates quite well," he states.

Most likely, the majority of Euro-3 gasoline will be sold near production locations — in the northern regions and the Krasnodar Territory, says Selin from "Siala." According to him, we are not talking about significant volumes, and during high-demand seasons, this gasoline might not suffice for other regions, he explains. Producing such fuel is not a panacea, but merely a temporary solution to the deficit problem. Many engines currently in use were designed for Euro-3, so it is unlikely to cause them harm, adds the expert.

However, auto service centers are already noticing an increase in damaged vehicles. The number of inquiries in June alone increased by approximately 10-15%, reported Forbes co-owner of the VR Auto aggregator for service centers, Mikhail Kozhanov. According to him, all categories of motorists suffer, from owners of luxury brands to those with Russian and Chinese vehicles. "Most modern cars are designed for Euro-5 fuel, but in reality, Euro-4 or Euro-3 is increasingly being used, leading to the failure of engine components, filters, spark plugs, and injectors. This is a problem, [the number of inquiries] is growing and will only increase; not all cars react immediately. Malfunctions in fuel injection systems may only become apparent after several poor-quality refuels," says Kozhanov.

Support for Refineries

Allowing Euro-3 production will partially address the deficit issue and assist smaller producers in ramping up fuel production. Large enterprises have not been overlooked. The agreements for refurbishing refinery capacities have been extended until December 31. This applies to plants that entered into modernization contracts with the Ministry of Energy before June 1, 2019, amounting to no less than 60 billion rubles, and which were supposed to launch capacities by January 1, 2026, but did not manage to do so.

Back in 2019, the Ministry of Energy concluded several agreements with major oil companies granting them the right to receive a refund on the excise tax for crude oil upon fulfillment of one of two conditions: either the share of class 5 gasoline must be at least 10% of the processing volume, or investments in modernization must exceed 60 billion rubles from July 1, 2014, until January 1, 2026. The new law raises the minimum investment volume for modernization from 60 billion to 100 billion rubles.

Oil companies that signed modernization agreements with the Ministry of Energy receive a tax refund on crude oil, known as an "inverse excise tax," explains Sergey Tereshkin, CEO of the Open Oil Market petroleum marketplace. Essentially, this is a subsidy calculated based on a complex formula related to the crude processing volume. Since 2021, an investment surcharge of 30% of the inverse excise tax has been added to it, he elaborates. However, previously, only those companies that invested at least 60 billion rubles in new processing units could count on it. Now, the threshold has been raised to 100 billion rubles. It is possible that this sum will include funds for restoring technological installations that were taken out of service for unscheduled repairs in recent months, says Tereshkin.

The inverse excise tax, notes Tereshkin, is typically received by large refineries, usually part of vertically integrated oil companies (VIOC), who have the resources to introduce secondary oil processing units. In 2025, these refineries received 2.39 trillion rubles, nearly 1.3 trillion rubles of which was accounted for by the inverse excise tax, and 170 billion rubles — by the investment surcharge, Tereshkin notes.

Importers Not Forgotten

Another measure to overcome the deficit was the importation of fuel. 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 shipped from India to Russia. Kazakhstan, according to the agency, agreed to supply Russia with 50,000 tons of gasoline in July and August. Furthermore, Reuters indicates that Moscow plans to import 400,000 tons of gasoline monthly from various countries, including Belarus, which, according to estimates, tripled its shipments to Russia to 70,000 tons during the first half of June compared to the same period in May.

To stimulate imports, the new law will for the first time allow damping payments to companies selling foreign-produced fuel in Russia. The list of sellers will be determined by the government.

The damping mechanism compensates for the differences in fuel prices between the domestic market and abroad for producers and importers. If the export price of fuel exceeds the domestic price and exporting becomes more profitable than supplying to the domestic market, the state compensates producers for the difference; conversely, if it is less, companies must pay into the budget. Importers, meanwhile, are compensated for the difference between foreign prices and domestic market prices.

The damping mechanism for producers is calculated based on the difference between the actual external price and the fixed internal price. This year, the fixed internal threshold for AI-92 gasoline is set at 62,300 rubles per ton, and for diesel at 58,950 rubles. This same threshold will apply to importers, with the difference that the actual prices in the EAEU will be used as external indicators, explains Tereshkin from Open Oil Market.

Regarding gasoline produced in other countries, the law states that the size of damping payments will be determined by the Federal Anti-Monopoly Service (FAS) based on the indicative price for AI-92 gasoline in India and its delivery costs to Russia. According to Tereshkin, the cost of gasoline in the Indian market is unlikely to be lower than in Russia, considering that global prices have yet to return to levels seen in February 2026. According to FAS data, the average export alternative price for AI-92 gasoline rose from 57,976 rubles per ton in February to 98,897 rubles per ton in May 2026. This indicator is calculated based on European prices, Tereshkin warns; however, price calculations for Asia may not significantly change the situation.

For importers of fuel from the Eurasian Economic Union (EAEU), which, in addition to Russia, includes Belarus, Kazakhstan, Kyrgyzstan, and Armenia, the compensation coefficient for the volume of imported fuel is higher than that for Russian fuel producers: 0.9 versus 0.68. Moreover, the payments will be applied retroactively from June 1, 2026. Starting on this date, the volume of imported gasoline from Belarus and Kazakhstan for calculation purposes will be multiplied by 0.9, meaning that the higher the import volume, the larger the damping payments, explains Tereshkin from Open Oil Market.

From the Exchange to Gas Stations

Another measure adopted by the government included a reduction in the mandatory sales quota for gasoline at exchange trading from 15% to 10% of production volume. This rule will be effective from July 1 to September 30, 2026.

The reduction in quotas, according to Shevyrenkov of IEF, will allow major oil companies to utilize fuel not sent to exchanges at their gas stations.

Since integrated oil companies are short on gasoline to supply their own networks, a decision was made to sacrifice some independent gas stations that procured fuel from the exchange, adds Selin.

Tereshkin of Open Oil Market believes that lowering exchange sales quotas is an incorrect decision. He considers that it will make gasoline and diesel less accessible for independent gas stations, including in regions where there are insufficient large company gas stations.

The FAS has also joined the efforts to resolve the fuel crisis, announcing on July 6 that its Moscow regional office has opened cases against six independent market participants who simultaneously raised prices for gasoline and diesel at their gas station networks, while the Orenburg regional office initiated similar cases against three independent fuel market players.

All Too Late

So far, the implemented measures have not yielded results. According to the latest data from Rosstat, the growth in gasoline prices accelerated from June 29 to July 6. AI-92 rose by 2% from the previous week to 70.21 rubles per liter, AI-95 increased by 2.3% to 76.19 rubles per liter, and diesel fuel became 3.4% more expensive, reaching 87.76 rubles.

This time, Rosstat did not specifically indicate which region saw the highest price spike. Last week, it was Sevastopol, where prices surged by 30%. However, Putin was informed on July 8 by Sevastopol's governor, Mikhail Razvozhayev, about the sharp rise in AI-95 prices, which reached 197 rubles per liter.

The importation of fuel should have been stimulated a couple of months earlier when the risks of unscheduled technological downtimes at refineries became evident, argues Tereshkin from Open Oil Market. This would have helped avoid the formation of queues at gas stations, he states.

Given the current market situation, it may be an opportune moment to transition to free pricing on the St. Petersburg exchange and at gas stations themselves, along with abandoning the damping mechanism, asserts Selin from "Siala." This could stimulate commercial fuel imports and help swiftly close the deficit in the domestic market, he believes.