Ukraine continues to attack Russian refineries with drones but as drones only carry a 5-50kg explosive payload, rather than the 500kg carried by bombers, they can’t destroy a refinery, only damage it. The attacks have a high PR value for Kyiv, but so far they have had little practical impact on Russia’s export revenue or the international prices for crude or refined oil products.

The attacks have reduced Russia’s oil refining volumes by an estimated 14%, but as Russia has a refining capacity that is 2.5 times larger than its own needs, this reduction has had little impact on the Russian economy or domestic prices for fuel, according to a report by Michael Liebreich, Lauri Myllyvirta and Sam Winter-Levy for Carnegie Endowment for International Peace.

Rosstat data shows that Russian domestic fuel retail prices were extremely stable. Domestic wholesale prices showed some movement, but that movement could be explained by fluctuations on the international markets, and was less drastic than price movements on the US wholesale oil product markets.

Diesel and gasoline production has declined from the beginning of March, but declines of such amplitude and duration have been observed before, and even at the nadir of the decline, production stayed well above historical levels since 2018 (excluding the COVID-hit year of 2020, when production was uncharacteristically low and therefore unsuitable for comparison). Even export shipments did not show any pronounced and definitive pattern assignable to the attacks.

News reports show that damaged units at many of the refineries were back in operation after two to three weeks of repairs, and Bloomberg-reported refining volumes are down from their peaks but above the troughs and again within the customary volume band.

Russia did import some volumes of gasoline from Belarus, which was widely celebrated by the media. But the volume in question was a single trainload in one week – less than 0.5% of one week’s consumption – while Russia kept exporting naphtha (straight-run gasoline) and diesel. Considering that not a single unit converting naphtha into gasoline was subject to an attack, that import was most likely for logistical reasons, rather than because of a countrywide shortage of fuels.

The true losses Russia has incurred from the wave of attacks on refineries is the cost of repairs – probably in the vicinity of tens of millions of dollars per plant: a large sum compared to the costs of the attacks, but very far from the initial hopes and estimates of billions – and some lost revenue from the volumes that had to be exported as crude oil instead of oil products.

For the oil companies, the loss could be up to $15 per barrel on the switched volumes. According to Bloomberg, Russia refined 5.2mn barrels per day of oil on average in April 2024, compared with 5.5mn bpd in January. Assuming that all of the 300,000 barrels per day that were not accepted into refineries were exported as crude oil rather than a product basket, this switch would lead to a loss of $135mn for the month of April. According to CREA data, Russia earned more than $16bn from its oil and oil products exports during the same period.

“The Russian government is to a large extent indifferent as to whether Russian oil companies sell their volumes as crude or oil products. It taxes crude oil at the wellhead quite heavily, using a formula linked to global prices, and then taxes corporate profits. Corporate profits go up when oil companies export products instead of crude, but the effect on the state budget is rather small. Coincidentally, the Russian government pays a subsidy of $10 per barrel on refined volumes, so it might actually benefit from the switch,” Carnegie said.

The effect of Ukraine successfully completely destroying a Russian refinery is mixed. For the Kremlin, Russia would continue to make money from exports, but crude exports would increase while oil products exports would fall. However, the political consequences for the US in particular would be more severe. The shortage of refining capacity would flood the market with more crude driving the price of crude oil down but substantially widen the refining spread (the price difference between crude oil and fuels made out of it), causing petrol station prices to go up.

This was apparently the concern of the US administration voiced by Vice President Kamala Harris to Ukrainian President Volodymyr Zelenskiy in Munich in February 2024.

Russia’s oil refineries have been hit by drones, but so far the price of oil products has not been affected by the decline in Russian oil refining throughput, because the effect of the attacks was not big enough: in 2023 Russia exported 700,000 bpd of diesel, but the difference between the highest and lowest weekly average output in 2024 was about 150,000 bpd and the trough did not last long, Carnegie reports.

For its part, Ukraine now has no refining capacity left. Its one facility, Kremenchug, was attacked soon after the war began and then again in February 2024 and is out of operation. With nothing in the oil sector to attack, the Kremlin’s retaliation for Ukraine’s attacks on oil refineries has been to target Ukraine’s power generation capacity where more than half of installed generating capacity has now been destroyed, in what Carnegie says is a gradual escalation policy by the Kremlin. The first Ukrainian attacks on Russian refineries began in January this year. The Russian response with a massive barrage of attacks on Ukraine’s power facilities began in March and is still continuing now.

“The Kremlin appears to be fighting a compartmentalised war, leaving certain areas of Ukrainian life and economics relatively untouched – until it decides that Ukraine has provoked it to a retaliatory hit. Sometimes it pulls back, like when it stopped attacking Ukraine’s grain export infrastructure. Possibly the Kremlin’s conflict management strategy is to maintain some unused space on the escalation ladder,” Carnegie said.

And now Russia is moving on to targeting Ukraine’s gas transit assets in the last months, beginning from the injection site of the largest underground gas storage facility in Ukraine that it had offered to European gas traders. “This was the first attack on this type of target: until recently, Russia had abstained from attacks on gas infrastructure, probably as a quid pro quo for unhindered gas transit to Europe,” says Carnegie.

Weekly gasoline production in Russia

Weekly gasoline production in Russia

Russian exchange fuel prices vs USD

Change in retail fuel prices in Russia

​Russian maritime oil products exports