Jubak: Developing economies stumble on fuel shortages

Another brilliant article by Mr. Jim Jubak, an absolute must read.

Here’s a quote from it:

At the end of April, gasoline sold for $3.03 a gallon in Moscow. When there was any to sell. Beginning in February, gas stations across Russia started to experience shortages. That’s a direct result of investigations launched by Prime Minister Vladimir Putin into steep price increases in gasoline. With the government cracking down on rising prices, effectively capping gasoline at a time when world oil prices had soared, Russian oil producers and refiners had started to ship more gasoline overseas. Prices for gasoline and diesel in Russia in March were $70 to $150 lower per metric ton than on world export markets, according to the Jonathan Muir, the CFO of the TNK-BP joint venture. The company, Muir said, would have earned $54 million more in the first quarter if it had exported the gasoline it instead sold in Russia.

So guess what? Russian refiners started to do just that — and fuel shortages emerged first in the country’s more remote areas, such as Siberia and the southern Altai region, and then in urban areas such as St. Petersburg. In the Altai, more than 700 gas stations have closed. In the Siberian city of Tomsk, gas stations limited customers, even city buses, to 25 liters a day. Because city buses need 80 to 100 liters a day to operate, you won’t be surprised if I tell you that 20% of buses didn’t run on April 28.