Ukrainian attacks reportedly cut Russia’s oil-processing capacity by 30%

Recent Ukrainian attacks have reduced Russia’s oil-processing capacity by 30%, according to sources cited in the report. Refineries process crude oil into usable fuels such as gasoline and diesel.^[1]

The report does not specify when the affected capacity could return or quantify the decline in actual fuel production.^[1]

If the damaged capacity reduces Russian fuel exports, buyers may turn to refineries elsewhere. The harder replacement supplies are to obtain, the greater the potential upward pressure on finished-fuel prices. Refiners still operating could earn more from processing oil if their fuel selling prices rise faster than their crude purchase costs. The scale depends on how long the disruption lasts and whether other suppliers can fill the gap.^[1]

Higher fuel prices would raise operating costs for airlines and freight carriers. Their ability to pass those costs into fares or fuel surcharges would determine the pressure on profits. The direction for crude prices is less clear: affected refineries may also buy less crude, so lost processing capacity alone does not establish that oil prices will rise.^[1]

Impact

What to watch next

• The November 12 EIA gasoline-inventory release will help gauge the US market’s inventory cushion against tighter fuel supplies; it will not establish Russia’s production loss.