this post was submitted on 08 May 2024
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Washington’s criticism is misplaced: attacks on oil refineries will not have the effect on global energy markets that U.S. officials fear. These s​trikes reduce Russia’s ability to turn its oil into usable products; they do not affect the volume of oil it can extract or export. In fact, with less domestic refining capacity, Russia will be forced to export more of its crude oil, not less, pushing global prices down rather than up. Indeed, Russian firms have already started selling more unrefined oil overseas. As long as they remain restricted to Russian refineries, the attacks are unlikely to raise the price of oil for Western consumers.

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[–] kava 14 points 6 months ago* (last edited 6 months ago) (2 children)

Even if Russia increases crude oil exports to compensate, virtually all of their gasoline is produced domestically for domestic consumption. That demand isn't going to just disappear. Every liter that Russia stops producing from these refinery strikes will be imported from other sources.

They will have to Kazakhstan in order to make up the difference (which they have already started, afaik), then prices go up on the global market for gasoline.

If gasoline price goes up, there's economic incentive to buy crude oil to produce gasoline. That raises price of crude oil. You can't avoid it. It's all connected. You reduce global production and you raise price.

[–] MrVilliam 12 points 6 months ago* (last edited 6 months ago) (1 children)

I'm okay with reducing my gas use and/or paying more for gas in order to keep Putin out of Ukraine. I know that not everybody has room to stretch their dollar, so I don't mean to come off as callous, but my minor inconvenience is easily worth stopping bombs from hitting civilians in Ukraine. We already know that appeasement doesn't work. Putin will not stop. Let's stop allowing money to decide for us whether we should let monsters thrive.

[–] [email protected] 2 points 6 months ago* (last edited 6 months ago)

You bring up a good point that isn't addressed very well. There's still less refined oil being produced that is demanded. In this case, its for Russia. I suppose this demand is partially reduced as Russia will try to minimize unnecessary refined oil usage (maybe eventually increasing local prices to discourage unnecessary use), but even then I still feel their reduced refining capabilities should have an impact on prices.

I suppose that other refineries could pick up the slack, but I'm uncertain whether that really makes sense for them, and there's not an easy way to countries against Russia can reduce their own usage of refined oil in the near term.

Ultimately, time well tell whether these attacks are having a strong impact on global refined oil.

EDIT: one thing that they do mention, that counteracts my point above is the fact that Russia exporting additional unrefined oil, that would mean unrefined oil pricing would decrease, which could counteract the reduction in production of refined oil.