Russia on the brink of a fuel crisis: domestic oil supply is shrinking, refineries are reducing their output

The Russian economy may face a new blow. Against the backdrop of falling global oil prices, Western sanctions, and Ukrainian attacks, the Kremlin urgently convenes a meeting due to the alarming decline in the volume of oil product transportation within the country. 

This was reported by the Ukrainian Foreign Intelligence Service.

The Russian government is concerned about a potential fuel shortage in the domestic market, especially during the critical sowing season for the agricultural sector.

The reduction in domestic fuel supply is a result of the declining profitability of oil refineries — a key element of Russia’s energy chain. The decrease in internal oil transportation is caused by:

1. Increased tariffs for oil pumping — from January 1, 2025, they rose by 9.9%, directly hitting the margins of the domestic market.
2. Higher excise taxes: AI-95 gasoline rose to $212.8 per ton, diesel to $150.9. This made the domestic market less attractive to producers, who increasingly focus on exports or reduce production.
3. Reduction of buffer payments aimed at stabilizing domestic fuel prices. In the first four months of 2025, these subsidies shrank by more than 2.5 times — from $1.9 billion in January to $780 million in April. This means state support for refineries is rapidly weakening.
4. Logistical difficulties: shortage of rolling stock and reduced priority for oil transportation on Russian railways. Over 60% of fuel is transported not by pipelines but by rail and road, adding extra strain on critical infrastructure.

The cut in fuel supply is not just an energy problem but a sign of systemic destabilization of the Russian economy. The industrial sector, farmers, and logistics may face fuel shortages, leading to inflation spikes and social discontent.

As of May 2025, several refineries are already reducing capacity, and further worsening of the crisis may cause temporary or permanent shutdowns. The energy crisis in Russia amid budget exhaustion is no longer a future scenario but a rapidly unfolding risk.

If the current trend continues, Moscow may face the most serious systemic challenge to its energy vertical since the collapse of the USSR. Combined with sanctions pressure, loss of export markets, and military spending, this creates real conditions for the collapse of the key pillar of the Russian economy — the oil and gas sector.