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Government makes threats and promises, but fuel does not want to appear at filling station yet

Prime Minister Denys Shmyhal warned representatives of the fuel business against abuse. During the online meeting with them, he stressed that the main task is to provide people with fuel and to prevent abuse in the market. According to him, the state will respond to such manifestations according to the laws of wartime.

Schmyhal also said that he had had talks on liberalizing logistics routes with the President of the European Council, Charles Michel, and the President of the European Commission, Ursula von der Leyen. The European Union introduced the so-called corridors of solidarity for Ukraine. A similar instrument worked during a pandemic inside Europe, when vaccines and medicines were transported.

"The authorities are doing and are ready to do everything necessary to give businesses the opportunity to import fuel into the country. At checkpoints, automobile and rail transport with fuel is given absolute priority. We are also negotiating other delivery routes to expand our logistical capabilities," the Prime Minister added.

The State Border Guard Service said that automobile transport with fuel crosses the border from the Ukrainian side without queues.

First Deputy Prime Minister Yulia Svyrydenko informed that the number of fuel trucks crossing the border every day has increased by almost a third compared to the beginning of May.

Reduced fuel quality requirements

The government has amended the technical regulations for the requirements for motor gasoline, diesel, marine and boiler fuel, according to which the production and circulation of petroleum products of Euro-3 and Euro-4 emission standards is allowed. The amendments are valid until the end of martial law.

The main differences between the emission standards are the sulfur content and the volume fraction of benzene. For the Euro-5 standard, the sulfur content is not more than 10 ppm, for Euro-4 — 50 ppm, for Euro 3 — 150 ppm. Accordingly, the acceptable proportion of benzene is 1%, 3%, and 5%.

The amendments, in particular, will make it possible to legalize the production of petroleum products at mini-refineries. According to the Consulting Group A95, the mini-refinery produced about 35,000 tons of gasoline and up to 10,000 tons of diesel fuel, most of which belonged to Euro-3 and Euro-4 standards.

"In fact, nothing has changed for consumers, fuel from mini-refineries was on the market before the war, but now its share has grown significantly. For a significant part of the Ukrainian car fleet, Euro-3, and even more so Euro-4 does not pose a significant threat, because most of the indicators are important for the impact on the environment. But for a fragile modern minicar with a bunch of electronics, an encounter with such fuel can be fatal," Artem Kuyun, expert of the Consulting Group A-95, explained.

Raising marginal prices

On May 14, the Ministry of Economy published new average prices for gasoline and diesel fuel, on the basis of which the marginal price of selling fuel at filling stations is calculated.

Compared to the beginning of the month, the calculative price for gasoline increased by 2.17 UAH/l, for diesel fuel — decreased by 32 kopecks/l.

Taking into account the marginal trade markups, the maximum price for "usual" gasoline for its sales at filling stations will not exceed 39.86 UAH/l, for "usualr" diesel fuel — 42.31 UAH/l.

Accordingly, premium brands of fuel can be sold with a 5% surcharge: A-95 gasoline —for 41.85 UAH/l, diesel fuel — for 44.42 UAH/l.

The operators may not comply with this surcharge and set their own price for fuel with improved quality indicators, but only on the condition that "usual" fuel is sold at filling stations along with it.


Fuel market prospects

Sergei Kuyun, Director of the Consulting Group A-95, believes that there are prospects for improving the situation on the fuel market, they are encouraging, but time is needed. "Moreover, it is far from a fact that we already see all the problems in this direction. Until the market is filled, the problem of shortages and speculation will not disappear," the expert explained.

Kuyun noted that now there is a lot of talk about the need to abolish state regulation in the fuel market. Supporters of this move believe that if prices rise sharply, then demand will fall, resale of fuel will stop, and it will appear at filling stations.

"It is necessary to realize that at such prices there will be 100% profit (which wholesalers and filling stations will share among themselves), and this will not help increase supplies in any way. What's more: when foreign suppliers and carriers see such liberalization, they will increase tariffs," Kuyun believes.

According to him, business recognizes that the current system for calculating marginal prices is adequate and the problem is not in state regulation, but in the lack of supplies.

"Yes, speculation for 60-70 UAH/l will continue if the government does not truly imbue itself with control. Only real one, and not just checking receipts, which speculators do not issue at all," the expert explained.

Kuyun summarizes: high prices and long queues do their job — fuel consumption decreases. At the same time, the supply is growing little by little.

"I hope that by the end of May the deficit will fade a little. It is unlikely that restrictions will disappear, but they will not be so severe. In June, we will face a new challenge — the harvest, but by that time supplies should improve in several directions. In general, a new supply system should start working by August," the expert predicts.

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