At the beginning of the week, diesel and gasoline prices at gas stations in various regions of the country rose again by another 2 hryvnias. Why this is happening, how much fuel currently costs, and how operators form prices in the domestic gasoline and diesel market, UNN asked Leonid Kosyanchuk, an expert in the oil product market.
Details
He explained that the price of fuel in Ukraine is formed from several consecutive components:
- import cost of the resource;
- excise tax;
- VAT;
- logistics costs;
- costs of maintaining gas stations and network margin.
At the same time, the final price is additionally affected by the fuel shortage in Europe, supply risks, regional pricing policies of operators, and the competitive situation in local markets.
The base price starts with imports
According to Leonid Kosyanchuk, the key feature of the Ukrainian market is that it is almost entirely dependent on external supplies.
Given that today in Ukraine, well, in fact, more than 96% of the supply comes from imports, it (imports, - ed.) sets the starting point for calculating the price. The Ukrainian market directly depends on European quotations, contract terms, and resource availability.
The first element in this scheme is the importer's contract with the supplier. It is usually tied to the average quotation for a certain period and an additional premium. When there is enough resource, the premium can be minimal or not included at all. But in conditions of shortage, it quickly grows.
Today, the premium starts at $150 per ton. If there is a shortage of diesel in the European market, the supplier may apply a different quotation formula or add a risk premium. Such a surcharge can be $150-170, and at the beginning of the full-scale war, when Ukraine lost part of its storage infrastructure, it reached $200.
Taxes automatically increase the input price
After the contract value, taxes are immediately included in the price. Leonid Kosyanchuk explained: this, although technical, is a significant stage in forming the price of fuel for the end consumer - an ordinary car or truck driver in Ukraine.
Here, the expert in the oil product sector emphasized: it is important to keep in mind that at the border, fuel is subject to excise tax, which is calculated at the euro exchange rate, and then value-added tax (VAT) in hryvnias is already charged on the sum of the contract value together with the excise tax.
That is, the contract value itself. Then the excise tax. Plus VAT on this entire amount. And we have the input price.
That is why, even before delivery to the gas station, fuel already undergoes several levels of price increase. If the contract price has increased, the effect is amplified by taxes, since VAT is not charged separately from other components, but on the total amount. The result is that any movement in quotations or the exchange rate quickly affects the input cost.
Thus, Kosyanchuk gave an example that after such a calculation, the input price can reach 60-68 UAH per liter even before adding subsequent costs.
Logistics after crossing the border, which has become a separate factor
After customs clearance, fuel - diesel and gasoline - still needs to be delivered to the point of sale. And here the cost again "jumps" due to a combination of risks in wartime conditions.
Thus, for security reasons (to avoid enemy missile and drone attacks), the classic scheme with large oil depots does not work fully, so supplies have become more complex and expensive. Now fuel is transported in smaller capacities, and then distributed to gas station networks. This directly affects the cost per liter.
Leonid Kosyanchuk separately noted that large premium networks themselves are the largest importers, and therefore influence not only retail but also wholesale prices.
This is important for understanding why the cost of fuel at different gas stations is formed unevenly. After all, some operators have better access to resources, their own logistics, and greater influence on the wholesale segment. Others are forced to buy more expensively and within an already formed market corridor.
According to the UNN interlocutor's assessment, logistics alone increased by 40% in just one week.
Already up to four hryvnias per liter of fuel, the transport component - delivery from the border to the gas station - (has become more expensive, - ed.)
Therefore, even without changes in taxes or contract terms, transportation alone can raise the final price for the consumer by several hryvnias. For diesel fuel, this factor is particularly sensitive, as it is consumed in large volumes by the transport sector.
At gas stations, constant costs and margin are added to the price
After delivery to the gas station, the network begins to form its own price.
As the expert explained in an exclusive interview, conditionally constant costs for maintaining the gas station are added to the price:
- staff salaries;
- taxes on the payroll fund;
- electricity costs;
- heating costs;
- waste disposal fees;
- land fees;
- other operating expenses.
Kosyanchuk separately emphasized that these costs are called conditionally constant only formally, because in reality they are also constantly growing.
After that, the network determines the size of the commercial markup.
Retail fuel trade is a business. And a business must be profitable.
He elaborated: in relatively "calmer" periods, operators can maintain one profitability norm, but in periods of turbulence, the market begins to act more harshly. Thus, some networks include in the price not only current costs but also expected risks of future supplies.
We, consumers, have to pay for future supplies. Make an advance payment for future delivery. This is their logic, although I do not accept this logic.
In his opinion, a more correct approach would be: first to sell the cheaper resource that is already in the tanks, and to raise prices only after a more expensive batch arrives or at the moment when its cost has already been accurately calculated. Otherwise, the consumer pays not for the actual cost, but for the network's expectations regarding the future market.
Why the same network can set different prices
Leonid Kosyanchuk also drew attention to the regional difference in prices. According to him, networks often differentiate fuel prices depending on the solvency of a particular region. In the capital and large cities, prices may be kept higher because demand there is more stable and consumers generally have greater purchasing power. In less affluent areas, networks may lower prices to avoid losing sales volumes.
If a gas station sets too high a price in a region with weaker demand, sales will fall, and along with them, the ratio between costs and sales volume will worsen.
In order to reduce the cost of processing one liter of fuel, we must sell more with the same conditionally constant costs.
In such a case, for the network, not only the price per liter is important, but also the number of liters it can sell per day, week, or month.
Why free pricing leaves room for abuse and what to do about it
Another element that affects the final price of gasoline and diesel is the market regulation model.
The expert reminded that in Ukraine, there is a free pricing regime for those goods and services for which state regulation has not been introduced.
Operators set prices that they consider necessary or possible.
In such conditions, much depends on competition in a particular area. If one gas station operates within a radius of tens of kilometers, it gets significantly more freedom to set prices than a station in a city where the consumer can choose between several networks.
Kosyanchuk explained that in the absence of alternatives for the buyer, the operator can set a slightly higher price, and formally this will not be a violation of the law.
It is precisely due to the combination of these and other factors that the price of fuel in Ukraine is formed at several consecutive levels.
First, the market receives imported resources at a price tied to external quotations and premiums. Then excise tax and VAT are added to it. After that, the cost is increased by logistics, which in wartime conditions has become more expensive and complex. Then the economics of a particular gas station network, its costs, regional sales strategy, and pricing decisions come into play.
As a result, the price on the gas station display, which the driver sees every day, is the final result of the entire chain from the import contract to the cash register at the gas station.
Recall
Earlier, we wrote that the average price of diesel in Ukraine rose to 95 hryvnias per liter. An anomalous gap in fuel prices, reaching almost 30 hryvnias per liter, was recorded in the regions.