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. Last Updated: 07/27/2016

Gasoline Shortages Spoiling Summer




SOCHI, Southern Russia -- Outside a resort belonging to the Prosecutor General's Office, a government chauffeur sold gas out of his Zhiguli for 9 rubles a liter to other motorists - about twice what was being charged at the pump. But drivers, frustrated by a city-wide gas shortage, were lining up to buy it.


"People from the government should themselves be put in lines to refill cars," said one angry driver at a Sochi gas station.


From the Black Sea to the Pacific Coast, gasoline shortages are creating a summer of discontent for Russians. Swearing motorists are standing in long lines for gasoline and paying high prices for the cheapest, low-octane fuel - and more often, getting no gas at all.


President Boris Yeltsin and Prime Minister Sergei Stepashin discussed the sporadic gasoline shortages last week, and Stepashin is tentatively scheduled to meet with oil industry barons Thursday. Earlier this month he characterized rising world oil prices as "a time bomb ... being put under the domestic economy," because they may provoke domestic fuel shortages and kick off a broader round of consumer price inflation.


The gas lines are also an election-season headache for the government, and the Kremlin's opponents smell blood.


"While Stepashin is shuttling around abroad, the government is evidently losing its grip over the gasoline problem," Communist Party chief Gennady Zyuganov said Tuesday in Moscow. "[Stepashin's ministers] have no new ideas, no programs, not even an emergency program for the harvest or any assistance to the Far North."


The root of the problem is that oil prices on world markets are much higher than those available on Russian domestic markets, where government pressure keeps prices low. Oil companies would rather export their production for lots of dollars than sell it for a few rubles to local refineries that service Sochi gas stations.


This has been less of a problem until recently because world oil prices were depressed to around $10 a barrel and the ruble was trading to the dollar at 6 to 1. Now the ruble is trading at 25 to the dollar, and a barrel of oil is trading near $20, so oil companies have a greater incentive to risk government anger and skimp on local sales.


The hitch is that most oil companies can't get their oil to world markets without the help of state-controlled pipelines and ports, and the state is not in a mood to help them unless they divert enough oil to domestic needs - not just for motorists, but also in this harvest season for farming equipment, and for some electric power plants.


Indeed, the government is more worried about the harvest than anything else - and Zyuganov on Tuesday was warning they were flirting with famine.


High fossil fuel prices are good for the Russian economy because every second dollar Russia earns comes from sales of oil or gas. When oil prices go up, Russia gets more tax revenues, and more dollars to pay off its dollar-denominated foreign debts.


But as elsewhere in the world economy, high oil prices mean gasoline is either more expensive at the pump - a cost hike that gets passed on to consumers buying goods delivered to stores by trucks - or, if the price is held artificially low, shortages result.


At the pump in Moscow, gasoline is still available and hovers at around 5 rubles per liter.


But gasoline shortages in recent weeks have plagued St. Petersburg and Kiev. And now across southern Russia - from Kalmykia to Stavropol, from Krasnodar to Rostov - gasoline has jumped to 9 rubles per liter. Many filling stations have simply shut down.


There have also been intermittent power outages caused by lack of fuel to run generators. In the Krasnodar region where Sochi is located, power to nonessential users - that is, homes - is turned off two hours a day at different times during the day.


"We are very close to the dire straits of the Far East," said Yury Isakov, a spokesman for Yuzhenergo, the Pyatigorsk-based regional office of Unified Energy System, the nation's electricity monopoly.


But even the Far East, which has been a byword in Russia for economic anarchy and power outages, has been spared the kind of petrol pump pain that has hit southern Russia this summer.


The situation is particularly untimely for resort towns like Sochi, where last week fares for city bus transport were raised from 2 rubles to 3 rubles a ride, and where a taxi ride costs twice as much a comparable ride in Moscow.


This was supposed to be Sochi's year: The resort had hoped to see a tourism revival fueled by last year's ruble devaluation.


That devaluation launched a wave of import substitutions across the economy, and tourism was no exception. In July, Sochi officially hosted 64,000 hotel guests, about 3,000 more than city officials even thought it could possibly handle. The real figure may be more than twice that, because many guests rent private lodgings.


But angry lines at gas stations, sporadic power outages and the resulting chaos for local businesses and services did not cover the city with glory. The weekly newspaper Sochi sadly referred to its hometown as a "disposable" resort - one where many people visited this summer for the first time in a decade, or ever, but were unlikely to return to thanks to bad memories of July's hassles.


Last week, Stepashin blamed the fuel shortages on falling production by troubled oil major Sidanko. On Monday, Sidanko officials in Moscow dismissed such allegations, saying the company was responsible for supplying fuel only to Saratov and Rostov, while other southern regions were served by its colleagues, LUKoil and Rosneft.


A LUKoil spokesman, Igor Beketov, said Tuesday only that LUKoil was still supplying gasoline to its 21 gas stations in the Krasnodar region. Rosneft in turn blamed regional administrations for the shortage, saying they were not paying government fuel bills.


"The Krasnodar region already owes us 400 million rubles [$16 million]," said Sergei Svistunov, a spokesman for Rosneft.