Ukrainian attacks on Russian refineries work but we pay the bill too

Europe will also pay the high price of Ukrainian attacks on Russian refineries. Kiev's drones, in action in recent weeks, have heavily damaged Russian capacity in the hydrocarbon refining sector, leading to a reduction of 900 thousand barrels per day (JP Morgan estimate). It means around 15% of the total. A problem for Moscow, but also for the rest of the world, Europe in particular. “The Ukrainians have understood that to obtain concrete results and damage the Russian war machine the way is to hit the refineries. But the price to pay will be high for us too”, explains Gianclaudio Torlizzi, founder of T-Commodity.

Today there are around 19 Russian refineries damaged and last weekend there was a resurgence of Ukrainian drone action. And if attacks from a 1200km radius reached a 1500km radius, the impact on production would affect 21 refineries. Hitting energy infrastructure has the first and obvious impact on the supply capacity of the Russian army and on Moscow's economy. So much so that Russia, starting to feel the effects, blocked the sale of petrol abroad (including Italy) from the beginning of March to the end of August, to protect the national market.

But there are and will be effects on the European and world economy, not just Russia. The number one problem is the price. “Diesel today is hovering around 845 dollars per ton, not far from the historical record reached in 2022. Price tensions will rise and we can't do anything about it. The increases mean inflaming inflation and therefore a greater obstacle for the ECB to cut interest rates in the future”, explains Gianclaudio Torlizzi. And the record price of diesel also affects African countries struggling with the currency crisis, such as Nigeria, Libya and Tunisia. The price issue is therefore global.

Problem number two is fuel availability. Europe has significantly reduced its dependence on Russian fuel following the outbreak of the war in Ukraine and the resulting sanctions. In Italy it has gone from around 13% in 2022 to less than 2% today. “But the issue of availability can become a problem if you look at the entire market. Today, in fact, it is even more important to obtain supplies from Arab countries, but this is done with the Suez Canal slowed down. The African route is stressed and even if the risk of shortages is minimal at the moment the problem of delivery delays is high. Furthermore, history shows that the more you stress a supply chain, the more it has to run to satisfy the markets and the more the risk of accidents increases. What if a refinery in the Arab countries caught fire? There would immediately be a further shock. The less you diversify, the more you are subject to the unexpected,” continues Torlizzi.

How did we get to this? “The fuel shortage situation that has now erupted with the Ukrainian drone attacks highlights the structural deficiency of the refining sector, which is the result of European climate policies. The issue of climate policy contrasts with that of economic security. It is the nemesis of climate politics. They were created precisely to free us from dependence on hydrocarbons from other countries. In reality, done in the European way, it led us to be in a situation of further dependence on the countries from which we had to free ourselves. Because it was carried out in an ideological manner, imposing rapid disengagement on hydrocarbon producing companies without having the tools ready for an alternative”, concludes Torlizzi.