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Fuel crisis: Officials promise to end it on May 5, experts mention August

10 reasons of fuel shortage and ways out of it Photo: Photodrive

10 reasons of fuel shortage and ways out of it Photo: Photodrive

Kilometer-long queues at filling stations, despite the sharp rise in fuel prices, speak for themselves — the country is experiencing the worst fuel collapse since independence. The Page has found 10 reasons for fuel shortages and ways to get out of it.

1. Disruption of fuel supplies from Russia and Belarus

Over the war, the import of gasoline and diesel fuel from the Russian Federation and the Republic of Belarus has stopped. It covered more than half of the daily consumption. That’s right, despite all the government's statements, one of the most strategically important sectors of the economy until recently depended on the Russian energy market.

2. Unfulfilled promises of the Ministry of Economy

On April 1, not without the help of the SSU, the Swiss Proton Energy, the largest importer of Russian oil products, formally left the Ukrainian market. The Ministry of Economy assured the government that it had agreed with the major players in the fuel and lubricants market to diversify sources and logistics in order to ensure the volume of supplies in a controlled manner.

"Volumes of supplies that were provided by Proton Energy will be completely replaced from other alternative sources," — Ihor Petrashko, former Minister of Economic Development, Trade and Agriculture, commented on the situation. "All importers and market participants confirmed that the country has reserves for diesel fuel and the ability to quickly replace suppliers if necessary. There is no risk of fuel shortage. The stocks are sufficient to meet the needs of consumers and a sowing campaign."

3. Impossibility of large wholesale supplies

Currently, Russian troops control the entrances to all Ukrainian seaports, which excludes large wholesale — tanker — supply of both crude oil and fuel. The situation is similar with railway logistics. The aim of the missile attacks on the Zakarpattia, Lviv, and Volyn regions is to disable the railway arteries, and hence — the impossibility of delivering fuel and lubricants by tank wagons.

4. Shelling of oil refineries and oil depots

The enemy is consistently destroying Ukraine's fuel infrastructure. Back at the end of February, due to the threat of shelling, the Shebelynka Gas Condensate and Oil Processing Department shut down. It is still unclear when it will start working — today the front line runs 20 km from the country's second largest oil refinery.

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On April 1, over missile attacks, the Kremenchuk plant Ukrtatnafta, the leader of oil refining, the Kremenchuk plant Ukrtatnafta, also shut down. The damage is such that even in peacetime it would take 3-4 months to refurbish it. So, we will not see the A-92 soon.

"The refinery itself and the surrounding depots with fuel and lubricants were massively shelled. The infrastructure of the enterprise has been destroyed." the head of the Poltava Regional Military Administration Dmytro Lunin said. "I ask residents not to line up for gasoline and not create an artificial deficit. There is a war in Ukraine, the situation is very complicated, but completely controlled."

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In parallel, oil depots and logistics terminals are systematically attacked by missile strikes, 24 of them have been destroyed to date. "The goal of the aggressor is to stop the economy of Ukraine with an artificially created shortage of fuel." First Deputy Prime Minister Yulia Svyrydenko commented on the situation on April 29. "Over the next 7 days (that is, by 05.05 – Ed. note), the deficit will be eliminated, since the operators have contracted volumes in Western Europe. And now we are solving the issue of their delivery to the territory of Ukraine."

As long as there is a danger of missile strikes, no one wants to store fuel reserves in oil depots. Therefore, refueling comes literally from the wheels.

5. Increased fuel consumption

The increase in fuel consumption has also contributed to the situation. This includes sowing campaign, agricultural exports, and the mass return of resettlers back to large cities, and the resumption of passenger traffic. According to Oleksandr Pavliuk, the head of the Kyiv Regional State Administration, 230 commuter and intercity public bus routes have been resumed in the Kyiv region, which involve about 300 vehicles.

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6. Slowdown in automotive logistics

The only possible way to supply fuel today is by public roads. And their condition is far from okay. Let’s count together: destroyed bridge crossings, broken roads, lack of preventive maintenance, curfew plus traffic jams due to numerous roadblocks.

7. Traffic jams at border crossings

The military, volunteers, and even the customs officers themselves complain in unison that the border crossings are clogged with "Euro-plates". To date, the lines of commercial vehicles at the Polish border have grown to 15 km. And even though the problem is not the number of car transporters with used foreign cars, but the traditional slowness of customs work, the situation with the delivery of gasoline and diesel fuel is a stalemate.

"To date, no one has accurate information about the state of filling stations located in the occupied territories or in zones of active hostilities," Oleksandr Melnychuk, director of the strategic marketing and innovation department of BRSM-Nafta, complains. "In four regions alone, the invaders destroyed and/or looted 14 filling stations."

8. Artificial price ceiling

Another clumsy attempt at state regulation adds problems as well. Under the above mentioned conditions, it became a verdict for those small operators who had neither strategic reserves nor a financial cushion. The marginal price for fuel set by the Ministry of Economy (34.1 UAH/l A-95 and 38.7 UAH/l diesel fuel) was calculated on the basis of a large wholesale purchase price, which implies sea or rail transportation. Under the current conditions, traders can import fuel only by trucks, which significantly slows down and increases the cost of delivery. Yes, on April 29 the government raised prices to 42 UAH and 47 UAH, respectively. But this was again done too late. As a result, wholesale prices in conditions of shortage became noticeably higher than the established retail prices: 45-50 UAH/l plus operating costs — at least 2 UAH/1 liter.

"Force majeure is not regulated — Dmytro Leushkin, the head of the Prime group (the Brent +, MKR Oil, MKR Retail, and Opek fillng station chains) appeals to officials. "It is necessary to cancel state regulation, because the market is speeding into a dead end. Show me where you can buy fuel with a gasoline standard according to your calculations, I promise — I will eat my left shoe in public. Your state regulation, under these conditions, is nonsense. As well as promises to fill the market in a week."

9. Sharp decrease in the number of filling stations

This is not only a matter of hostilities, although the number of destroyed and looted filling stations has already reached more than a hundred. Trading fuel in the current conditions has become not only dangerous, but also unprofitable. As a result, back at the end of March, a pestilence of "private traders" began — the so-called "barrels" and noname filling stations. Then, in April, it was the turn of small chains. To date, even all-Ukrainian operators are forced to "half" their filling stations, closing some and transferring others to the sale of either exclusively premium grades, or one specific type of fuel, or serving only corporate customers.

It is indicative that an increasing number of traders sell fuel at prices much higher than the allowed level. And all the same, the queues are only growing, reaching 1-1.2 km.

10. Sluggishness of state apparatus

Add here the traditional Ukrainian bureaucracy that even before that was unable to quickly respond to certain challenges. Moreover, the Ministry of Economy traditionally regards the shortage of fuel as another cartel conspiracy and sees itself solely as a judge.

Quote"In just a few days we will no longer have a shortage of fuel," Oleksandr Kornienko, the First Deputy Chairman of the Verkhovna Rada, promised on May 3. "We are working a lot with the government, and everyone saw a solution that allowed us to reboot the fuel shortage process."

Now is not the best time to think about your own pocket. It is necessary to make a balanced and reasonable decision, taking into account the interests of not only business, but also consumers. We are in dialogue, but if we are not heard, then the state can stop democracy with some market participants. We make concessions, and in return we get new and new conditions under which companies will supply fuel.

How to eradicate fuel shortage in Ukraine

Who is to blame — is now clear. What to do? Solve regulatory problems as radically as the fuel market as a whole is being restructured. Changing work algorithms, standard hours, "time-limits" — you can’t remain as slow in wartime as in peacetime.

"Until August, the fuel shortage will not disappear anywhere," Mr. Leushkin is convinced. "Get used to new conditions. Alas, Ukraine does not let fuel trucks bring fuel. It takes 2-3 months to go through the procedure for obtaining all the papers. Hence the term for resolving the issue by the means of fuel trucks."

We need to continue to digitize document flow, simplify the licensing of filling stations and commissioning certificates, certifying new tractors and semi-trailers, entering data into the "Put" system and the Ukrtransbezpeka website, speeding up the issuance of environmental certificates, chip cards for tachographs, international licenses and passports for drivers. To refuse for a while from checking fuel tanks — who would think of carrying flour or fish there? It is necessary, finally, to solve the problem with drivers of military age — unfortunately, there are no female drivers in Ukraine with the necessary qualifications. Abolish, for once, issuing "permits" for truckers from Lithuania, Poland, and Romania, since they removed them for us.

In short, administrative resources are needed — a number of issues can be resolved only at the government level. The intervention of the guarantor directly is needed with an appeal to the presidents of neighboring countries — Romania, Slovakia, Moldova, Poland, Hungary, and the Czech Republic with a request for help. It is necessary to achieve the same simplification of the document flow as in the case of our agricultural exporters. Unlike Ukraine, in the EU countries governments manage oil terminals and railway hubs, which means they are able to quickly help eliminate the shortage. In addition, a separate committee is needed in the Cabinet of Ministers, which will not only deal with agreeing documents with neighboring countries, but literally "manage" each truck from A to Z.

To let our trucks skip the queue, ignore minor technical and bureaucratic inconsistencies, and deliver fuel to the border. Finally, we need to create "green corridors" for fuel tanks for the next couple of weeks.

On the basis of the Prime Group office, Mr. Leushkin creates a rapid response headquarters and a consulting center. Starting today, a hotline is working allowing any owner of a fuel tanker to get advice on the nuances of paperwork, rules for traveling abroad, and on European traders. But even these countermeasures, in his opinion, will not eradicate the deficit in the near future.

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