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Fuel prices reduce in Ukraine, what happens afterwards?

Author : Serhiy Kuiun

Source : 112 Ukraine

The oil market continues to plunge into quarantine. After the first two weeks, gas stations have lost 20-40% of sales, after which they stabilized
09:21, 13 April 2020

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The oil market continues to plunge into quarantine. After the first two weeks, gas stations have lost 20-40% of sales, after which they stabilized.

Related: Oligarch Kolomoisky wants more: Privat group aims to rise Ukraine's diesel, gas prices

Sales

The greatest losses were suffered by the gasoline stations, mainly used by private car owners. To a lesser extent, the decline affected diesel fuel, consumed mainly by commercial and industrial vehicles. Although small "diesel" losses at the level of 10-20% were just a terrible dream of gas station owners a month ago. By the way, the main wholesalers in April reduced their procurement plans by 20%. Demand is supported by farmers, who use it during spring fieldworks.

The largest decline in sales traders is noted in the Chernivtsi and Zakarpattia regions.

Catering has failed as well (on average by 40%). But in some places, sales of coffee grew. In many regions, local authorities demand to stop selling coffee at the gas stations.

The situation in the station stores is slightly better. Firstly, visitors to the stations immediately buy what they need without visiting a large store. Secondly, some owners have expanded the nomenclature in stores, following the "quarantine" trends - cereals, medical masks, antiseptics.

Related: Petrol, diesel fuel, autogas cheapen in Ukraine

The fall is slow and steady. From the beginning of quarantine (March 12, 2020) diesel fuel lost 0.11 $ / l (11.5%), A-95 gasoline - 0.12 $ / l (11.6%), liquefied gas - 0.05 $ / l (12.9%).

The main engine of the process is the economy segment stations. There are two reasons: these networks do not hold large stocks, buy at the wholesale market, where prices are the first to respond to the external situation. For example, diesel already costs less than 0,55 USD / l.

Another incentive to move discounters more actively is the activation of the main competitor – illegal immigrants. Let me remind you that last January the Cabinet cleared the “shadow market” well, but as soon as the virus loosened its grip and the purchase prices plummeted, everything turned back.

As for the big players, they are forced to keep a 2-3-4-week supply of fuel. The management of the three large retail chains that I have managed to talk with over the past two days says they haven’t even a ton of cheap April resources in their system. But the process is going on, which means whether they want it or not, they would have to follow the discounters.

Related: Price of petrol, diesel fuel, autogas continue to fall in Ukraine

Forecasts

According to Adam Sikorski, head of the UNIMOT energy holding, which coordinates the AVIA network throughout Europe, in Italy, retail sales of petroleum products fell by 90%, in Spain – by 70-80%, in the Netherlands and France – by 50-60%. About the same way we go with Poland - a fall of 20–25%. So the current stabilization is most likely temporary, as quarantine tightens (and the peak is still ahead, as everyone probably understands), sales will fall. The upcoming holidays will aggravate the situation.

On the one hand, storages are filled with a cheap product. About 0,11 USD per liter is a quite tangible reduction potential, which is supported by a stronger hryvnia. On the other hand, the expected drop will increase the unit cost of each liter. There is no clarity with the future of the currency: how to assess 16,000 amendments to the law on returning of nationalized banks to their old owners? Is this already the end of Ukraine’s collaboration with the IMF? And then what about the currency rate? 30 UAH per 1 USD? Or 40?

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