The fuel market and the war: what will happen to prices and when the fuel shortage will disappear

Experts promise higher prices and limited sales

One of these days in Ukraine noticeably cheaper fuel – prices for gasoline and diesel fell by about 25%, in money terms it is 7-10 hryvnias per liter. Liquefied autogas, on the contrary, has risen in price by a third – by 6-7 UAH/l. The deficit and queues at gas stations are gradually disappearing, but in many regions, especially in the outback, it is still not easy to refuel a car – there is no fuel. Since April, mass spring field work begins, which means that not only the army, but also farmers will need diesel fuel in large volumes. And the old supply chains do not work, new ones are in the process of formation. What is happening in the fuel market and what to expect next in a war, found out “Today”.

In the collage – the current average prices for March 21.

Our experts: Sergey Kuyun, director of the A-95 Consulting Group, Gennady Ryabtsev, deputy director of the Psyche Scientific and Technical Center, and Artem Kuyun, an expert on the liquefied gas market.

: Day of lower fuel prices: what is really happening at Ukrainian gas stations

What has changed in the fuel market during the month of the war

The main problem was the cessation from the first days of the war of the shipment of oil products from the aggressor country of the Russian Federation and its satellite – Belarus. The latter, as you know, was the main supplier of diesel fuel and significant volumes of autogas to Ukraine. Diesel and gas were also coming to us from the Russian Federation.

“The first week of the war was the most difficult, when the mass movement of civilians began, and the supplies at gas stations ran out in a matter of hours,” Gennady Ryabtsev analyzes. “In the battle zone, the enemy destroyed several oil depots, gas stations. Under these conditions, traders did everything they could in order to provide consumers with fuel to the maximum.

First of all, the army, the police, the State Emergency Service, the railway, as well as private transport. The sale of fuel to private traders was limited – no more than 20 liters per person, which helped soften the blow. Tensions began to subside towards the end of the second week of the war, when supplies from Eastern Europe were increased. Now the volume of deliveries is growing every day, although it has not yet been possible to fully compensate for the losses.”

The expert added that during the month, fuel consumption in Ukraine decreased by about a third of the usual volumes. Hundreds of thousands of people went abroad in their cars, intercity bus service was stopped, and public transport does not work. These factors alleviated the fuel availability problem. But at the same time, prices for it increased markedly – a liter of gasoline or diesel was sold in retail for almost 45 UAH. The high cost caused an increase in the cost of goods, primarily products, in the price of which the cost of their delivery increased sharply.

What did the Ukrainian authorities do

the Cabinet of Ministers and the Verkhovna Rada was promptly resolved the issue of lowering fuel prices by reducing VAT from 20% to 7% and completely abolishing the excise tax on gasoline, diesel and liquefied autogas. This made it possible to reduce the average cost of gasoline by 10.1 UAH/l, diesel fuel by 7.9 UAH/l. Recall: the price of regular gasoline and conventional diesel fuel has been regulated since March 2021, the cost of premium fuel and autogas is not regulated, so their price has remained market.

However, according to experts, it was necessary to reduce VAT and excise even before the start of the war, since the price of oil in the world exceeded $100 per barrel and continued to grow, which led to a noticeable rise in fuel prices in Ukraine. However, changes to the Tax Code have made it possible to quickly reduce the cost of fuel in retail (see below for more details).

The temporary use of low-grade Euro-4 and Euro-3 fuels with less environmental friendliness was allowed, which should also have a positive effect on the filling of the market.

“Strict European fuel requirements are pursuing environmental goals,” Sergey Kuyun explained. “Now there are much more serious threats to our life and health than exhaust emissions from refugee cars in traffic jams. There are Euro-4 fuel offers on the foreign market, which are cheaper and which are now very much needed.

The ZSU equipment will not notice this at all, tanks, cars, diesel locomotives and others will go easily – this equipment is not new for the most part. Civilian transport will also survive. Everything must be done to bring fuel to the market.”

Another component of filling the market and at the same time reducing fuel prices in the context of current world highs was the steps taken by the Cabinet of Ministers to change the formula for calculating marginal prices at gas stations and zero excises. On March 18, the Ministry of Economy published new marginal prices: for conventional gasoline – UAH 33.42/l, for conventional diesel fuel – UAH 37.05/l.

What are the fuel prices today?

According to the A-95 Consulting Group, on March 19 retail chains of filling stations set prices within the limits recommended by the Ministry of Economy. The average price in Ukraine for A-92 was reduced by 7.86 UAH/l, to 33.69 UAH/l, for A-95 – by 7.84 UAH/l, to 34.42 UAH/l, for diesel fuel – by 5.85 UAH/l, – up to 37.17 UAH/l.

In particular, on WOG and OKKO gasoline A-95 and A-92 fell by 9.68-10.10 UAH/l, to 33.32 and 33.42 UAH/l, respectively. Diesel fuel – by 7.85 UAH/l, up to 37.05 UAH/l.

The largest consolidated network of the Privat group (Avias, ANP, Ukrnafta, etc. – a total of 1,540 stations) has reduced prices for gasoline and diesel fuel by 5-7 UAH/l, to 32 UAH/l for A-92, 33 UAH/l for A-95 and 37 UAH/l for diesel fuel.

In the networks of AMIC, Shell, BRSM-Oil, Chipo, Motto, BVS, UPG and others, fuel prices fell by 2-11 UAH/l, or up to 32.32-33.40 UAH/l of gasoline and 36.92-37.95 UAH / l DT.

But prices have not been reduced everywhere, for example, on KLO gasoline still costs 43-43.50 UAH/l, diesel fuel – 44.50 UAH/l.

What will happen to prices while there is a war

Gennady Ryabtsev says that gasoline and diesel fuel will become more expensive in April due to logistics. Estimated at 2 UAH / l.

“The Cabinet of Ministers made changes to the resolution on price regulation, increasing transportation costs from $27 to $50/t and adding $150/t for other costs,” explained Gennady Ryabtsev.

The expert also expects that with the cessation of hostilities in Ukraine, oil prices in the world may fall below $80/barrel, and oil product prices will gradually return to the pre-war level – below UAH 30/l.

Sergey Kuyun says that the market remains unpredictable and volatile (changeable).

“Over the past three weeks, oil price fluctuations have reached 40%. But even at lower levels, prices remain high, only an increase in supplies of alternative oil to Russia can reduce them,” Sergey Kuyun said.

Will it be possible to overcome the shortage of fuel

Most likely, yes, but not immediately, but in a month or two. Prime Minister Denys Shmyhal announced that on March 19, according to the new delivery rules (with reduced VAT and without excise duty), the first thousand tons of oil products entered Ukraine.

“Further there will be large volumes. Prices will stabilize along with the stabilization of supplies and the saturation of the market,” the prime minister is sure.

Experts are cautiously optimistic. According to their forecasts, the fuel market of Ukraine will be filled with gasoline and diesel fuel every day due to the reorientation of our traders to supplies across the European border.

“But the supply of fuel by fuel trucks directly to gas stations during the war has become more complicated, so delays and interruptions are possible, and vacations may be limited to one person. This should be treated with understanding,” says Gennady Ryabtsev.

Sergey Kuyun emphasized that the Ukrainian market of oil products will have to turn around 180 degrees.

“This is not an easy task. A lot of resource, logistical and regulatory issues arise along the way, because there were no tangible supplies across the western border,” Kuyun says, adding that he has some optimism about filling the market.

The situation with autogas remains more complicated, since the significant stocks accumulated in February are running out, and now gasoline and diesel fuel are the priority in deliveries.

But, as Artem Kuyun noted, drivers of cars with LPG equipment always have an alternative, albeit a more expensive one – this is gasoline.

“Gas deliveries to Ukraine will definitely increase in April, as the heating season will end, and LPG gas is widely used in Europe for heating houses,” says Artem Kuyun. “Gas supplies are also necessary, as they will reduce stress on the gasoline market.”

In the longer term, the expert expects Ukraine to import liquefied natural gas from the United States, where it is plentiful. The high price of gas will serve as an incentive for this. Its marginal cost will be determined by the economic feasibility of use (gas consumption is more than gasoline consumption by 10-15%) and today cannot be higher than 28 UAH/l. So far, the average gas price in Ukraine is 25 UAH/l, the minimum is 20.3 UAH/l, and the maximum is 26 UAH/l.

Source: Segodnya

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