By early 1942, Germany had used up its oil reserves and was suffering significant oil shortages. Despite extensive interwar investment into synthetic oil plants, 75% of Germany’s oil was supplied by the Ploesti oil fields in Romania. In March of 1942, Romania ministers informed Hitler that they could not meet Germany’s planned oil needs for 1942. On 4 April 1942, Hitler signed Fuehrer Directive 41 which made seizing the Caucasus oil fields a priority. This would also have the added benefit of denying the oil to the Soviets, and was desperately needed by the German economy.
Despite being at war for almost three years, and engaged in hostilities with Great Britain, the Soviet Union and now America, the German economy was still not on a war footing. Furthermore, the larger amount of territory that needed defended combined with the losses of men and material in the past year, especially during the nearly incessant Soviet winter counterattacks, reduced the capacity of Germany military to conduct offensive operations. Unlike Operation Barbarossa the year before, the Wehrmacht could no longer launch a general offensive in the East on three axes. Therefore, Fall Blau (Case Blue in German), the German offensive in 1942 would focus on Army Group South at the expense of the center and north. Army Group North would continue its limited attacks on Leningrad, while Army Group Center stood fast in front of Moscow.
Due to extensive German deception operations, Stalin had expected the Germans to continue on towards Moscow and was taken completely by surprise by the German advance south east across the Ukrainian and Russian Steppe. After defeating several wasteful Russian spoiling attacks, on 28 June 1942, Fall Blau launched 1.3 million German, Romanian, Italian, and Hungarian troops towards the Caucasus Mountains and the Volga River. Four armies supported by eleven panzer divisions of Army Group South assaulted southeast with the final objective of seizing the oil fields at Maykop, Grozny, and Baku in the Caucasus Mountains and around the Caspian Sea. They did so with three axes of advance. The first was clearing the Crimean peninsula and capturing Sevastopol which had been under siege for many months. The second and main effort would be the strike towards the Caucasus for the oil fields. And the third axis was an advance on the Volga River in a supporting effort to protect the flank of the Caucuses.
The initial advance was wildly successful, especially so in areas supported by the Luftwaffe.