Why are fuel prices rising

Author

Vadym Makeiev

The rise in prices for oil products continues in Ukraine. Over the past two weeks, A-95 gasoline has risen in price by 5%—on February 2, the average retail price for a liter was 26.6 UAH. The average price of diesel fuel increased by 5.1% and amounted to 25.99 UAH/liter. This is evidenced by the price monitoring data of the Consulting group A-95.

One of the main reasons for the rise in prices for petroleum products is the rise in quotations of world oil prices.

Several factors affect pricing in the Ukrainian retail sector: world oil prices, the dollar exchange rate and prices on the external market, since Ukraine is an import-dependent state. Recently, we have seen a significant increase in world oil prices, which led to an increase in wholesale prices.

Leonid Kosianchuk

CEO at SunOil

Leonid Kosianchuk

CEO at SunOil

The retail market does not respond synchronously to price increases. As the director at the Consulting group A-95 Sergei Kuyun told , wholesale prices increased by 4 UAH per liter, while the price of a liter on a stele increased by a maximum of 2 UAH. According to the expert, this is the result of unfair competition.

Now there are a lot of counterfeit products from illegal mini-refineries on the Ukrainian market. The producers of these counterfeit products do not pay excise duty. In addition, we see the development of VAT evasion schemes, misuse of excise invoices. As a result, we have a lot of resource on the market that is much cheaper than the factory one.

Sergei Kuyun

Director at Consulting group A-95

Sergei Kuyun

Director at Consulting group A-95

At the same time, according to oil market analyst Oleksander Sirenko, nothing supernatural has happened, except for unexpectedly high quotations for oil and oil products in Europe.

There will be no further price increase in the near future, despite the fact that there are prerequisites for this, Leonid Kosianchuk believes.

"Yes, on the one hand, retailers feel the pressure of the wholesale market, but on the other hand, our consumption is now at such a level that raising retail prices and thus reducing sales will not be a very wise decision," he told .

According to Oleksander Sirenko's forecasts, in the near future the prices for gasoline and diesel should stabilize, since plus 2 hryvnias in two weeks is a sharp rise. At the same time, if world prices continue to rise, then the cost of fuel at gas stations will rise.

"We do not produce enough fuel in Ukraine to satisfy domestic demand and not depend on external factors. We have 80% of diesel imports and 50% of gasoline imports. We are very attached to external factors," he explains.

In addition, the second index, the national currency, deserves special attention. All imported fuel is bought for foreign currency. To make a purchase, hryvnia must be exchanged at a high rate, make a purchase, all this must undergo customs clearing, taxes must be paid and everything must be transferred back to hryvnia. Thus, the cost of this product at the gas station is growing. Gas station networks have to raise prices to keep working.

The quotes that the Ukrainian market is guided by have been holding high for two months, despite the lockdown and the decline in consumption. It feels like oil has no quarantine. Gas station networks were forced to raise prices even with a slight delay. This could have been done earlier and more smoothly, adding not 1 UAH per week, but 30-50 kopecks.