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  • Russia’s invasion of Ukraine is driving up petrol prices around the world, and sanctions threaten Russia with inflation.
  • But Russians won’t be feeling it at the pump.
  • The price of petrol – already shockingly low by South African standards – is falling sharply.
  • Russia is a big producer of fuel, and has fewer and fewer places to sell it.
  • For more stories go to www.BusinessInsider.co.za.

South Africans are now paying a record R21.60 for a litre of 95 in Gauteng, in part thanks to a big jump in oil prices as Russia massed an army on the borders of Ukraine, and another jump after it launched an invasion.

In Moscow, on the other hand, drivers who were already paying under R8 for a litre of the most commonly used A-95 can expect to see that price plummet in coming weeks, with a prospect of record lows, albeit at the cost of volatility in the price.

On Tuesday, Russian markets reported a 6% decline in the price of gasoline on near-future contracts for wholesale lots, making for a decline of around 10% since the start of the week.

That was despite the high price of oil on global markets, mirrored in areas sensitive to the price of oil – such as the share price of Sasol.

See also | Thanks to Russia, Sasol shares are now up 1,130% from their 2020 pandemic low – so far

Russia is the third-largest exporter of oil in the world, producing around a tenth of global demand. It hosts dozens of refineries, including some of the biggest in the world. That oil and refined petrol will now slosh around the domestic market, as European Union and other countries reduce imports of gas and oil from Russia and shut their ports to Russian ships, as major shipping companies also shut down routes to Russia.

Increasing sanctions add to Russia’s financial pain
As sanctions pile up and more companies pull their business, Russia is facing increasing financial pain over its invasion of Ukraine, and everyday Russians are feeling the impacts.
At the same time, domestic demand in Russia suddenly plummeted as interest rates doubled overnight, and consumers literally clung to their cash as various industries tried to figure out what the new global reality would mean for them.

In hard-currency terms, Russians have not paid more than R13.50 per litre of petrol for the last decade, and have been stable to slightly down measured over the past year. Measured in euro, Russians were paying just under R8 per litre in February.

In terms of the ruble – which lost a third of its value in a day – Russians were paying closer to R7 per litre before. Should sanctions hit as anticipated, and Russia can maintain its production of oil and petrol, they can expect to see that price move towards R5, less than a quarter of the South African price that is forecast to remain high for the foreseeable future.

(Compiled by Phillip de Wet)

SOURCE:

For Russians – already paying under R8 a litre – petrol is getting cheaper fast (businessinsider.co.za)