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. Last Updated: 07/27/2016

Retailers Feel Brunt of Fuel Shortage

MTFuel shortages have forced some gas retailers, including TNK-BP and LUKoil to stop business at their networks.
The country's transportation fuels market is facing its biggest crisis in almost 20 years as severe shortages force some retailers to close their filling stations.

As global oil prices beat records, Russian firms are rushing to export both crude oil and refined products. That, combined with outages at refineries in central Russia, has caused a spike in wholesale gasoline and diesel prices.

The shortages have forced wholesalers to ration supplies to retailers, who in turn are unable to pass on higher costs after pledging to the Kremlin to keep pump prices stable ahead of the Dec. 2 State Duma elections.

"My vacation has gone to hell. I had to race back home after my staff told me that they had nothing to sell," said Alexander, a wholesaler who declined to give his surname.

Retail prices for A-92 gasoline in the Moscow area average around 19.2 rubles (78 cents) per liter, while wholesale prices at the main regional fuel depot work out at 16.5 rubles.

That works out at a profit margin of around 16 percent, below the 20 percent many retailers need to cover their costs. Profit margins on diesel are even lower, at around 7 percent, traders reckon.

LUKoil and TNK-BP have partly stopped business at their retail networks in the southern regions, while Rosneft's Siberian retail network has been working intermittently, traders said.

Petrol stations that yield little profit are also being shut down. "Temporarily shutting down filling stations that sell little can be a way to reduce operating costs, instead focusing on sales on busy highways," a source at LUKoil said.

Moscow city government held a meeting with oil companies and independent traders in the region last week to address the problem, a retailer said.

Russian drivers get easily angered about petrol prices as they ponder why they are on par with the United States, the world's largest oil importer, while Russia is the second-largest oil exporter after Saudi Arabia.

Although prices for motorists have been capped, they also suffer as access to petrol becomes harder.

Traders say TNK-BP's shortage has forced it to limit its supply of "summer" diesel fuel and popular A-92 gasoline to drivers, particularly at petrol stations in Rostov-on-Don.

"Some were giving no more than 60 to 100 liters of diesel and 20 liters of A-92 [per vehicle]," a local trader said.

Life is worse for the independent petrol station operators, some of whom are wrapping rubber hoses around their pumps to signal that they are out of fuel.

In Saratov, one trader said he was unable to fill his car for 300 kilometers because of a lack of open petrol stations selling good quality fuel. "On the motorway, people are not able to get A-92 fuel, only low-grade A-80," he said.

Despite the troubles, many independent petrol stations are soldiering on.

"Closing down a petrol station is not respected and can be embarrassing in front of our competitors, plus you can lose customers for the future," one filling station owner said.

Low-octane A-80 gasoline, used by Russian car models, has meanwhile disappeared from many stations. Some fly-by-night operators are slipping in octane-boosting additives illegally and profiting by selling the fuel more expensively as A-92.

"Who wants to work for nothing?" said one Moscow trader, who requested anonymity.