Ukraine's drone war upends Russia's fuel market, causing shortages and price hikes
Russia is facing a severe fuel crisis triggered by Ukrainian drone strikes on oil refineries, with production falling to a 20-year low. Shortages are affecting most regions, agriculture, and logistics, while authorities struggle to contain price increases.
Scope of the crisis
Russia is in the acute phase of a fuel crisis, with gasoline and diesel shortages affecting most of its regions as well as annexed Ukrainian territories. Ukrainian drone strikes, including an attack on the Omsk refinery on July 6—the last major untouched facility—have crippled refining capacity. According to analyst Gary Peach of Energy Intelligence, Russia's refining volume fell 25% in June 2025 compared to the same period in 2024, dropping to 3.91 million barrels per day, the lowest in over 20 years. Gasoline production declined 17% year-over-year to 850,000 barrels per day, while diesel sales plunged 35.4%. Unmet demand on the St. Petersburg exchange reached 62,040 tons for AI-92 gasoline and 38,520 tons for AI-95 as of July 1.
Economic impact
The fuel shortage is disrupting agriculture, with harvests delayed by one to two weeks and fuel costs for farmers rising by a third. Russia's largest online marketplace, Wildberries, raised seller commissions starting July 7, citing higher fuel prices. Retailers have asked the government for priority fuel access for food delivery trucks, warning of potential supply disruptions. Independent gas stations face even higher prices due to exchange rates.
Government response
To alleviate shortages, authorities have allowed the release of lower-grade Euro-3 fuel and may lower the standard to Euro-2, though this risks vehicle damage and environmental harm. In June, Russia imported a record 141,000 tons of gasoline from Belarus—141 times more than in June 2024—but Belarusian supplies are capped at 150,000–170,000 tons per month, while daily consumption is at least 110,000 tons. Kazakhstan offered only 50,000 tons for July and August, and India is shipping 60,000 tons via the Nayara Energy refinery partly owned by Rosneft.
Prices and inflation
Despite the government's damper mechanism, which subsidizes domestic prices to prevent panic, fuel prices continue to rise. Inflation accelerated to 6% year-over-year at the end of June, with the Central Bank identifying fuel prices as a key driver. The bank's head, Elvira Nabiullina, has downplayed the risk, but the crisis shows no signs of abating as Ukrainian drone attacks persist. Analysts warn that without effective long-term measures, the entire economy could face runaway prices and logistical collapse.
