A legacy of the Soviet era, Russian government policy has long skewed resources towards intense energy-consuming sectors such as heavy industry and defense. This has resulted in Russia being the least-energy efficient among the BRICS economies. Russia needs around 0.4 tons of oil equivalent to produce $1,000 of GDP, compared with the 0.08- 0.09 needed by Europe. However, at the same time, maintaining oil revenue is critical to the Kremlin’s projection of power, with around half of government income generated from oil. The country’s energy industry is now in a state of flux. Although Russian demand for oil has recovered somewhat since hitting significant lows in 2009 – and the nation’s car fleet has increased in tow, supported by a rise in Russia’s population after almost two decades of steady decline – fuel oil consumption has remained relatively sluggish since 1999, as other fuels in the power sector slowly replace it. Russia needs to rebalance the capacities of its downstream sector to reflect both the oil product demand of the domestic economy and its export markets.
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