SOVIET OIL MARKET INCREASINGLY CHAOTIC

The U.S.S.R.'s oil market is facing chaos as the nation's increasingly independent republics "prepare for economic war over petroleum," the Moscow business publication Kommersant reported. Russian republic refineries could find themselves in a crisis very soon, the newspaper predicted. It explained that refineries in the Ukraine and the Baltic area have far more processing capacity than regional crude production "and are ready to bid three times as much for oil than presently" on

Dec. 9, 1991

2 min read

The U.S.S.R.'s oil market is facing chaos as the nation's increasingly independent republics "prepare for economic war over petroleum," the Moscow business publication Kommersant reported.

Russian republic refineries could find themselves in a crisis very soon, the newspaper predicted. It explained that refineries in the Ukraine and the Baltic area have far more processing capacity than regional crude production "and are ready to bid three times as much for oil than presently" on Russian commodity markets.

Prices for crude and petroleum products have soared on non-Russian commodity exchanges because demand is climbing while supply is dwindling, Kommersant reported. It said the price for a metric ton (7.3 bbl) of A-76 (76 octane) gasoline on the Ukraine's Kiev Universal Commodity Exchange rose from 850 rubles Oct. 1 to 1,350 rubles Oct. 29. "Everything has been sold, and no new deliveries are yet in sight," Kommersant said.

PANIC BUYING

The newspaper noted there also has been panic buying of coupons authorizing purchase of 30,000 I. of A-76 gasoline. Those coupons previously had not been in great demand because of the complex procedure involved in exchanging them for fuel.

"Readiness to buy oil and refined products at ever higher prices is prompted not only by pressing needs but also by the desire of enterprises to get rid of rubles before currency changes are introduced," Kommersant said.

"Large sums of rubles are expected to be dumped on the Russian market, and this will have an adverse effect on the republic's (already high) inflation rate. Worse still, Russian republic refineries, most of which are still state owned, will find it extremely difficult to compete with Ukrainian and Baltic buyers," Kommersant said.

The November fall in value of the ruble to 110/$l in currency exchange trading is spurring price increases for commodities throughout the Soviet Union. Enterprises are dumping rubles for hard currency no matter what the rate in hopes of using the money to import consumer goods and then cash in on projected price increases, Kommersant said.

Soviet President Mikhail Gorbachev said the U.S.S.R.'s 1991 budget deficit is growing at an alarming pace. A major factor is that the Russian republic has stopped most of its payments to the central government.

The U.S.S.R.'s foreign debt is estimated at $65-100 billion.