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Oil price hits record high, gasoline prices in Ukraine continue soaring

Source : 112 Ukraine

The average price of A-95 gasoline in Ukraine grew by 51 kop – from 28.24 to 28.75 UAH per liter
12:00, 31 January 2018

112 Agency

Oil price is growing at a record pace on the global market. On the London stock exchange today, a barrel of Brent crude oil was traded at $70, the highest in three years. Although Ukraine’s gasoline market, heavily influenced by world price fluctuations, experts say that it became an additional factor affecting the price rise in Ukraine. Just within the holiday cycle, gasoline prices increased by 50 kop and are projected to rise by the same amount in the nearest future.

The price of oil on the London stock exchange today reached $70 per barrel, the highest it has been in three years. Futures contracts for Brent crude oil with shipping in March was traded at $69.26 per barrel at the ICE Futures Europe exchange. The WTI global index with shipping in March grew by $5.58 per barrel. WTI futures with shipping in February at the New York Mercantile Exchange rose by $0.23 and were traded at $63.8 per barrel, which is the highest it has reached since December 2014, Bloomberg reports.

Related: Experts name reason of price increase of petrol in Ukraine

Analysts expect oil price to continue rising. Amid the ongoing fall in output volume by the OPEC cartel, it is quite likely that the price will even reach $80 per barrel, they say. The market is further pressured by the lower supply in the US, a country with huge influence on the oil market. A number of holes have halted their production operations causing the country’s total supply of oil to decline for three months in a row. In particular, the supply at the Cushing hub in Oklahoma has dropped to the lowest it has been since February 2015. “Surplus years have come to an end, and people are beginning to realize this”, - Chief Analyst at Price Futures Group Inc. Phil Flynn told Bloomberg. He emphasized on the fact that the OPEC countries do not appear to increase output in the nearest future.

The global oil price increase led to a further rise in gasoline prices in Ukraine, which has been fevered since early September. The price of gasoline exceeded the psychological barrier of 30 UAH per liter by the end of last year. In December, when the price of oil stopped rising, the continued increase in the price of gasoline was caused predominantly by the hryvnia’s depreciation relative to the U.S. dollar. Every 10 kop change in the exchange rate tends to bring about an 8 kop change within a week, Director of A-95 Consulting Group Serhiy Kuyun noted in an interview published by Enkorr.

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The global rise in oil prices is currently the main factor contributing to the growth in local gasoline prices, Kuyun told 112.ua: “Oil price on global markets soared from $66 to $71 per barrel just within the first ten days of January. Oil was traded at $55 per barrel a year ago”. The expert also points out that the appreciation of the world’s main currencies, particularly the euro, in which fuel excise duties are priced, adds upward pressure on the price of gasoline in Ukraine.

Kuyun said that within the period of the holiday cycle [28 December – 12 January, 112.international] alone, the average price of A-95 gasoline in Ukraine grew by 51 kop – from 28.24 to 28.75 UAH per liter, the average price of diesel fuel increased by 56 kop – from 26.02 to 26.59 UAH per liter.

“Since 24 December, prices of diesel fuel and gasoline at stations belonging to the OKKO chain increased by approximately 3%. The main factors contributing to the price soar was the price of oil and oil products on external markets, as well as the depreciation of the national currency relative to the euro and the U.S. dollar. Since OKKO stations sell exclusively imported fuel, all of our payments to contractors are made in foreign currency. Furthermore, fuel excise duties in Ukraine are pegged to the euro”, - OKKO’s press service told 112.ua.

Related: Stock of liquefied petroleum gas in Ukraine increased by 10.7%

BRSM-Nafta has done its best to “maintain the lowest price possible for individuals”, - the chain’s press service has said. Also, the press service admitted that there are factors that cause the price increase and they are the exchange rate and the oil price increase. “However, there are other chains that have raised their prices considerably above the level prompted by the change in the exchange rate and the price of oil”, - BRSM’s press service told 112.ua.

As of 12 January, WOG has raised prices by 50 kop and is now offering A-92 gasoline for 30.92 UAH/l, A-95 for 31.95 UAH/l, A-95+ for 32.92 UAH/l, and diesel fuel for 29.45 UAH/l. At the same time, KLO is selling A-95 at 31.09 UAH/l, A-95+ at 32.19 UAH/l, and diesel fuel at 27.59 UAH/l. Parallel has raised the prices of all kinds of fuel by 30 kop: A-92 reached 29.16 UAH/l, A-95 reached 30.15 UAH/l, A-95+ reached 30.96 UAH/l, whereas diesel fuel is now priced at 27.66 UAH/l. Such operators as Shell, AMIC, BRSM-Nafta fuel price has increased on average by around 6-30 kop.

The rise in automobile fuel prices accelerated after the holidays, director of the scientific and technical center Psychea Serhiy Sapegin told 112.ua: “World oil prices are growing as a result of market speculations, which are mostly caused by financial resources and information”. At the same time, Psychea’s research find insignificant correlation between the world oil price and the price of oil products in Ukraine. However, if world oil prices continue to rise over a long period of time, domestic prices are likely to climb accordingly.

Related: Entrepreneur who organized fraud with petroleum products detained in Dnipro

Sapegin says that the country’s domestic fuel market is influenced mostly by the fuel bulk price on Ukraine’s border, as a result of the market being dominated by imported oil products. However, deviations from the linear relationship between the border bulk price and the retail price remain possible.

The experts surveyed by 112.ua were cautious in regards to forecasts of future dynamics in fuel price. “The price increase will stop as soon as the factors causing it – increase in oil price and the hryvnia depreciation – disappear”, Serhiy Kuyun told 112.ua. Director of A-95 Consulting Group predicts the price of fuel to rise by an additional 50 kop/l in the nearest future.

Related: Russia renewes supply of petroleum products towards Ukraine

“When it comes to predictions, those are difficult to make – everything largely depends on the stability of the hryvnia exchange rate. So far the situation is far from satisfactory: its rate has been dropping since early December”, - BRSM’s press service told 112.ua. “It should be noted that we as fuel traders are not in the slightest way benefitting from higher prices on oil products. On the contrary, we obtain more profits while the price is on the decrease. Unfortunately, we are not able to influence the key price-setting factors, hence, we are unable to forecast the future price dynamics”, - OKKO’s press service told.

It’s important to mention that LPG car fuel remains a cheaper alternative to gasoline in Ukraine. However, this may change soon. “Gas remains a cheap fuel thanks to the taxation skew – excise duty on gas is really low. This is why gas today costs around 40% of what gasoline is priced at, somewhere between 12.5-13 per liter at stations. I am convinced that the state is going to get back to the issue of increasing the excise duty on liquefied gas, as a car powered by LPG car fuel drives the same roads that need to be built and renovated”, - Serhiy Kuyun said in one of his interviews.

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