Ukrainian Prime Minister Mykola Azarov this month accused fuel importers of pushing up the price of gasoline through market manipulations.
He also hinted that fuel import duties would be imposed to protect domestic production. His comments come amidst rising fuel prices and as domestic refineries threaten to halt production due to a surge of gasoline imports into the country from Russia and other former Soviet republics.
The Kyiv Post asked Serhiy Kuyun, director of the consulting company A-95, what’s shaking up the nation’s fuel market and what gasoline prices drivers should expect in the near term.
Kyiv Post: Who is to blame for the rise in gasoline prices?
Serhiy Kuyun: At the moment, those gas station networks that sell imported products are raising prices less than the wholesale price is rising at Ukrainian factories.
Azarov said importers had a 60 percent market share, but we saw a share of 40 percent in 2010 and, in January, 30 percent, which is absolutely normal, weighted, and optimal for the market.
There can be no question of importers dictating prices. The products imported into Ukraine are mainly those not produced here, or are produced in limited quantities.
Retail gasoline prices at Ukrainian filling stations (above) have skyrocketed in recent weeks even as imports flooded the market. If domestic refineries freeze production, prices could go up even more. (UNIAN)
KP: Why are prices rising?
SK: Ninety percent of Ukrainian gasoline is made from imported crude, mainly from Russia. In January, oil reached $100 per barrel, and in February it jumped again in connection with the [crisis] situation in Egypt.
The second factor that played a role in January was the 40 percent increase in excise duties on gasoline, and of course that tax from the start of the New Year has been included in the price of oil products delivered to Ukraine or produced here. That has also pushed prices up. Prices for Ukrainian gasoline are 90 percent made up of the price of oil. Oil is sold to us at the global price.
KP: But domestic refineries have complained that they are struggling to compete with cheap imports, mainly from Belarus…
SK: There is no problem with cheap imports from Belarus. Belarusian fuel is sold on the exchange at global prices, linked to the global rate. There prices are sometimes higher than those for fuel from Ukrainian plants, sometimes lower.
KP: Why have refineries complained about cheap fuel from Belarus?
SK: It’s some kind of game. Ukraine’s refineries which are owned by Russian companies are the ones complaining about Belarus imports. If work in Ukraine is so hard for them, why do they ask for help from the Ukrainian authorities but not the Russian ones? Or why don’t they ask their parent companies in Russia for cheap oil?
As far as I know, Russian oil comes here at a rather high price so the local branches of Russia firms don’t earn much. In Belarus, all the fuel is sold on an open exchange, so it has a transparent market price. But we don’t have a fuel exchange in Ukraine, so we don’t understand how the Ukrainian refinery plants and the Russian firms that own them sell their fuel.
What we do see is that they found an enemy in the form of imports and wrote in a recent letter to Ukraine’s Energy Ministry, pointing that all the fuel, including that from Lithuania and Poland, harms their business.
KP: Are gasoline prices going to keep on rising?
SK: Everything depends on the global price of oil. The second factor is duties. If import duties are introduced in March, as has been suggested by the Energy Ministry, it will add an additional Hr 1.30 on the price of petrol and around Hr 0.80 on the price of diesel.
The price of petrol at the moment does not correspond to the market price, as there was an agreement between [First Deputy Prime Minister Andriy Klyuyev and market players on Jan. 28 to cap the price at around Hr 9 per liter.
I think officials realize already that prices can’t stay at this level any longer.
The price should really be around Hr 9.40 for A-95 petrol and about Hr 8.60 for diesel, according to the Energy Ministry’s formula. So the price should be on 30-40 kopecks higher then we have now at gas stations. This means that A-95 petrol is being sold now at no profit.
According to estimates of gasoline retail operators, the prices should be Hr. 9.50-9.60 for petrol and Hr 8.80-8.90 for diesel to meet market realities. [Without adjustments,] there may be a fuel deficit on the market this spring.
Kyiv Post staff writer Oksana Grytsenko can be reached at [email protected].
