Ukrainian Drone Strikes on Russian Oil Refineries: Impact on Gasoline Production and Economic Dynamics

Since the onset of the year, Ukrainian drone sorties targeting Russian oil refineries and depots have surged in frequency. March's culmination witnessed no less than 14 assaults on oil infrastructure. Resultant air raids rendered some refinery apparatus inoperable, precipitating a decline in gasoline output across Russia and a subsequent hike in prices. The BBC Russian service delves into the repercussions of these strikes on the Russian economic landscape.

Recent statistics indicate that drone strikes on Russian refineries are beginning to take their toll on gasoline production. Towards the end of March, production metrics began to plummet, with Rosstat documenting a 7.4% decrease for the week spanning March 18 to March 24 compared to the preceding week.

In tandem with this downturn, wholesale gasoline prices are on the ascent. At the St. Petersburg Commodity and Raw Materials Exchange this Wednesday, virtually all gasoline variants experienced price hikes, thereby setting the stage for retail price increases. Rosstat data reveals a 0.08% uptick in gasoline prices from March 19 to 25, a stark departure from the preceding trend of decline.

Despite the mounting pressure, industry experts have yet to sound the alarm over an impending crisis or scarcity. Russia maintains sufficient production capacity, with additional support from Belarusian imports.

By the close of March, approximately 14% of Russia's primary oil refining capacity had been rendered inactive due to drone-induced damage, according to calculations by Reuters.

Russian authorities squarely attribute the strikes to Ukraine. While Ukraine refrains from explicitly claiming responsibility for each individual attack, it does not disavow involvement either. The Financial Times reports that the United States urged Ukraine to desist from targeting Russian energy infrastructure, fearing the ripple effects on global oil prices.

In a Washington Post interview at the end of March, Ukrainian President Vladimir Zelensky lamented the tepid response from the US regarding Ukrainian drone operations against Russian energy installations. Defending the actions, he asserted, "We employed our drones. No one can dictate otherwise." Zelensky further questioned why Ukraine shouldn't retaliate when Russian attacks target vulnerable infrastructure, asserting, "Their society must adapt to life without gasoline, diesel, or electricity. It's equitable."

Helima Croft, managing director of investment bank RBC Capital Markets, opined to CNN that drone assaults on refineries could wield a more profound impact on the Russian economy than prevailing sanctions, which have largely spared the energy sector. "Indeed, it was the export of energy—crude oil, natural gas, and refined petroleum products—that provided Russia with an economic lifeline to sustain its war efforts," she underscored.