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Ukraine fuel costs soar: When will gasoline and diesel prices fall?

Author : Olena Holubeva

18:36, 2 October 2017
Ukraine fuel costs soar: When will gasoline and diesel prices fall?

Author : Olena Holubeva

As soon as emotions connected with sharp increase of auto gas prices at motor fuel market eased, the prices for diesel fuel and gasoline rose. The situation was noticed by the Antimonopoly Committee, which began research of the market looking for of anticompetitive concerted actions of market participants

18:36, 2 October 2017

Read original article at 112.ua

112 Agency

The Antimonopoly Committee began the research of light oil products market for the presence of anticompetitive concerted actions of market participants. The committee said it was troubled by the situation: from the beginning of September, average retail prices for A-95 gasoline in Ukraine increased by more than 5%. Retail networks that work under the brands WOG, OKKO, SOCAR, over the past two weeks have raised prices by 1.5-2 UAH per 1 liter of fuel. On September 26, the price for a liter of A-95 gasoline did not drop below 27.99 UAH at large network gas stations.

According to the A-95 Consulting Group , as of September 27-28, gasoline A-95 + reached the level of 27.26 UAH (1 USD)/liter. The cost of diesel fuel as of September 28 was 23.56 UAH / liter. For comparison: on September 8 (when the rise in price began and fuel in one day added an average of 10 kop. / liter), diesel fuel still cost 21.97 UAH / liter, while petrol A-95 + was at 25.76 UAH / liter. According to the Enkorr Internet portal, on the eve of September 7, prices for railway diesel fuel lots increased by 110 UAH / ton at once - up to 23 330 UAH / ton.

Why gasoline and diesel fuel are so expensive?

Serhiy Kuyun, director of Consulting Group A-95, notes two reasons for the rise in price of gasoline and diesel fuel in Ukraine: the growth of quotations for oil and oil products on European exchanges and the weakening of the hryvnia exchange rate. Quotes of oil products for the past 2 months increased by an average of 50-60 dollars. "This resulted in an increase of about 1.2 UAH to the retail price of a liter of fuel." Plus, he said, the next round of weakening the hryvnia gave the prices an increase of up to 50 kopecks on a liter. "Thus, the total cost of fuel increased by 1.7 UAH / liter, and in September we saw the process of this rise in price at gas stations," said the expert.

"Quotes of oil and oil products on European stock exchanges rose due to devastating hurricanes in the US. They paralyzed the work of companies located on the Gulf of Mexico. American market is very tightly integrated into the world market and influences its formation." In addition, the US, like Canada and Saudi Arabia, is a major global producer of oil and petroleum products, "explained Olexander Sirenko, editor-in-chief of the profile magazine NefteRynok.

According to Bloomberg, as of September 28, the price of oil on world markets reached $ 52 per barrel, which is the highest price in the last two years. With reference to the analysts of Commerzbank AG, as a reason for the increase in oil quotations, the agency notes a reduction in the volume of oil exports from the US after the hurricane Harvey, which swept over the Gulf of Mexico. It paralyzed the work of most of the enterprises located there, said Olexander Sirenko. Also, according to Bloomberg, quotes activated the statements of the Turkish authorities about the intention to ban Kurds of pumping oil on Turkish territory. Another factor is the statements by OPEC and Russia about their intentions to continue negotiations within the framework of the oil production reduction deal.

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In the interbank foreign exchange market US dollar was trading in the range of UAH 26.49-26.52, while on August 29 it was at 25.44-25.46 UAH. "Importers, seeing the situation in the foreign exchange market, consider risks when setting up the price of selling gasoline and diesel fuel, because if the national currency is unstable, they understand that they need more hryvnia to buy the dollar on the interbank market,” says Sirenko.

In addition, according to the editor-in-chief of NefteRynok, the planned stop of the key supplier, Mozyr Oil Refinery, also influences the oil products market. Its share in the total volume of diesel fuel supplies to Ukraine in 2016-2017, according to UPECO, reached 37.7%. The share of the enterprise in the volume of imports of gasoline is even higher: according to the results of 8 months of 2017, it accounts for 78.9% of all deliveries.

In a press release posted on September 8 at the Mozyr Oil Refinery site, it says that the general director of Mozyr Oil Refinery V. Pavlov signed an order to stop the plant's facilities for scheduled overhaul. In September - October, more than 30 technological installations, as well as torches for the catalytic production of gasolines and interchain communications facilities, should be repaired, the report said.

"To some extent, the situation is saved by the fact that traders knew in advance about the planned stop of the Mozyr Oil Refinery, so they diversified the supply routes, for which reason there should not be any excitement, except for a small deficit," Sirenko said. He notes that there is no opportunity to make significant reserves from oil traders: it is expensive to develop the reservoir infrastructure, and in the current realities it is inappropriate. "The market is accustomed to work, figuratively speaking," from the wheels "- you bought it and tomorrow this fuel is already at the gas station," said the editor-in-chief of NefteRynok.

Experts say that some drivers in the current situation prefer autogas, which again became significantly cheaper. After retail prices for it jumped to UAH 16.5 / liter at the end of June, propane-butane at Ukrainian gas stations, according to the data of the Consulting Group A-95, fell back to an average value of 13.67 UAH / liter.

Antimonopoly Committee "fines", but nobody pays

Due to such peculiarities, the Ukrainian market of petroleum products for many years is very sensitive to fluctuations in the external conjuncture. For almost every oil crisis, Ukraine reacts with higher prices for gasoline and diesel fuel. This situation is easily explained - for many years the country is dependent on the supply of imported motor fuel.

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Currently, only two oil refineries are operating: Kremenchug (Ukrtatnafta) and the state Shebelinsky refinery (part of the Naftogaz Ukraine structure). "The domestic producers are also forced to work according to the market. Shebelinskiy OR sells its products at auctions at a market price, and Kremenchug oil refinery imports oil, so it is sensitive to changes in stock quotes, because in order to produce gas next month, oil needs to be contracted today. To buy expensive oil tomorrow, we need to sell expensive gas today," said Olexandr Sirenko.

Experts explained each time period of price turbulence in the automotive fuel market by objective economic reasons, but the Antimonopoly Committee almost always suspects collusion.

As is known, in November last year, the AMCU fined a number of oil traders for 204 million 325 thousand 103 UAH for concerted actions to raise prices for light oil products in January 2013 - January 2016. Then gasoline A-95 prices rose from 10.78-11.6 UAH / l to 22.97-24.99 UAH / liter.

And note that, as in previous years, none of the companies has paid a fine. Almost all appealed to the court. "No one pays big fines for the AMCU, I did not hear fined oil traders doing it, all cases are hanging in the courts. In February, as far as I remember, there was a series of hearings, and then several companies received decisions in their favor, " Olexander Sirenko said.

Later the committee also found signs of monopolistic collusion in raising prices for autogas. The case has already been initiated on the grounds of anticompetitive concerted actions, as a result of which traders will obviously be fined.

When will gasoline become cheaper?

The prices for gasoline and diesel fuel are close to stabilization, says Serhiy Kuyun, director of A-95 Consulting Agency". "If there is no further weakening of the hryvnia, the price of the upper range is unlikely to continue to grow. Most likely, there will still be a correction of about 50 kopecks per liter in the economy segment, but everything else will depend on the exchange rate. The increase in the exchange rate of the dollar or the euro means plus 8 kopecks to the price of a liter of gasoline or diesel fuel, "he said. Olexander Sirenko notes that the stabilization of situation will contribute to the resumption of work at the Mozyr oil refinery, which is expected in late October.

At the same time, he said, finally the price of gasoline is stabilized, as soon as the decline in quotes on the exchanges begins. "I would like to note that in except of natural disasters, there are no prerequisites that could seriously affect the price: everyone is waiting for the price to roll back to the level of $ 45 per barrel and $ 500 per ton of gasoline," Olexander Sirenko said.

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