intermediates

Russia’s invasion of Ukraine in February 2022 set off a wave of repercussions in energy markets and economies the world over. The hope of the U.S. and its allies has been that international pressure and mounting sanctions would cause Russia to swiftly end the war — or at least make it very difficult to finance. But while the war rages on and Russia seems to be coping with the short-term impacts reasonably well, the long-term effects on its energy sector could be much more significant. In today’s RBN blog, we look at how Russia’s twin challenges — finding buyers for its crude oil and its refined products — are more different than they might seem and why Russia’s oil-and-refining sector is in the early stages of a sustained slowdown.

As the world economy tries to dust itself off after COVID, increased demand for transportation fuels coupled with tight supplies has become a pain. The shortage escalated to crisis levels this spring and summer when, in response to Russia’s invasion of Ukraine, sanctions eliminated Russian exports of crude oil and intermediate feedstocks to the U.S. and severely reduced flows to Europe. While Russia has been able to find some alternate markets, its overall product exports are down significantly. Adding to these product-supply reductions are policy decisions by Putin’s allies in China to reduce their product exports to a trickle. Chinese exports had been an important part of regional supply in recent years, but authorities there have decided to decrease the number and size of export quotas issued, leaving many refineries in China operating at rates well below their capabilities. In today’s RBN blog, we take a closer look at how developments in Russia and China have played a major role in the current global shortage of refined products.