Pump prices ease as fuel imports return
Jul 29, 1999 at 01:00
The gasoline crisis that struck Ukraine on July 17 has eased somewhat, although prices remain well above pre-crisis levels.
In the next two weeks, prices are expected to gradually recede even more, and some oil analysts predict that high-octane gasoline could reach pre-crisis levels of Hr 2 per within two weeks.
As imports resumed after a slash in tariffs, the prices of high-octane A-95 and A-98 blends fell gradually throughout the week, to an average of Hr 3.2 per liter in Kyiv on July 28. That was down from an extraordinary high of Hr 4-Hr 4.5 per liter at the peak of the crisis.
In addition, most of the capital's 400 retail gasoline outlets were back in business by July 28, eliminating the long lines that had formed outside the comparatively few stations that stayed open throughout the crisis. However, supplies of diesel and low-octane gasoline - used in most Soviet-made cars - were still reportedly scarce.
The reason the crisis has eased is simple, according to Konstantin Borodin, director of Ukrainian Petroleum Consultants, which monitors the Ukrainian petroleum industry: Traders have once again begun importing fuel, because the government has finally loosened the heavy import duties that had been cutting off imports.
The tariff-reduction law went into effect on July 22, slashing duties by more than 50 percent, from 80 to 100 euros per ton to 40 euros per ton.
Traders had been holding off purchases until the tariff cut went into effect. Analysts blame the government for creating the crisis through its clumsy implementation of the new tariff law.
Parliament passed the bill reducing the tariff on June 30, and President Leonid Kuchma signed it on July 12. But because of uncertainty over when the law went into effect, fuel traders simply put their orders on hold. That caused an immediate fuel shortage, which spiked up prices.
Borodin said that, even though fuel is once again flowing into the country, traders are attempting to milk extra profits by keeping prices as high as possible for as long as possible.
'The prices will be falling slowly,' he said. 'The demand is still high ... Who would want to reduce the prices?'
The fuel shortage did its damage in the short time it was here, particularly to farms. The Agriculture Ministry scaled down its grain-harvest forecast from 30 million tons to 27 million tons, citing worse-than-usual fuel shortages.
And farms are not out of the woods yet, with shortages of diesel and low-octane gas - typically used by farm machinery - expected to last through the harvest season.
'The people are afraid of bringing in A-76 and diesel,' said a Moscow-based petroleum expert who did not want to be named. 'There have been numerous reports of the government confiscating it and sending it to the farms.'
The hryvna also remains under pressure. Sell rates at kiosks throughout Kyiv averaged about Hr 4.3 to the dollar on July 28, down from about Hr 4 before the fuel crisis.
