The Ukrainian fuel market entered autumn with a sharp rise in prices. As of September 18, the average price of A-95 gasoline reached UAH 93.33 per liter, while diesel fuel cost UAH 98.55 per liter. In some networks, diesel has already crossed the psychological threshold of UAH 100. An additional risk factor could be panic-driven demand if drivers and businesses simultaneously begin building up stocks amid fears of new Russian strikes on fuel infrastructure.
What is happening in the domestic fuel market, and what prices should drivers prepare for in the coming month? UNN asked fuel market expert Leonid Kosianchuk.
The energy expert acknowledges that there are currently no grounds for optimistic forecasts regarding the situation on the Ukrainian fuel market, and that the difficulties are indeed real. They are related to the fact that our country currently receives almost 90% of its petroleum products from Europe.
"The situation there (on the European market — editor's note) is very complicated. Especially considering that Saudi Aramco — a state-owned oil company — announced that, as far as supplies to the European market for October are concerned, they will either suspend them or limit them," the expert clarified.
According to Kosianchuk, ORLEN Lietuva could serve as an alternative to Saudi Aramco. It operates the only oil refinery in the Baltic countries, the Mažeikiai Refinery, as well as oil pipelines and the terminal in Būtingė. The company is one of the main suppliers of gasoline and diesel fuel in Lithuania, Latvia, and Estonia. Its capacity could help cover certain shortages and prevent the crisis from deepening.
Diesel is becoming more expensive faster than gasoline: what is behind this
The most tense situation has emerged precisely with diesel fuel. In mid-September, its European quotations rose to a record $1,644 per ton. In just five days, the increase amounted to about $172 per ton, or approximately UAH 7.7 per liter when converted. The price later fell back to $1,553 per ton, but this level remains high nonetheless.
Fuel market expert Leonid Kosianchuk, in an exclusive comment to UNN, drew attention specifically to this unusual gap between gasoline and diesel.
"For the first time in all my many years of work in this market, we are seeing diesel fuel cost almost UAH 10 more than gasoline," he said.
Actual prices at Ukrainian gas stations confirm this: on September 21, the difference between the average price of A-95 gasoline and diesel fuel was more than UAH 5 per liter. Moreover, last week some major networks kept diesel at UAH 99.8–99.9, while one network had already set the price at UAH 100 per liter.
Leonid Kosianchuk explains that the reason for this trend is not a shortage of fuel directly at Ukrainian gas stations.
"Ukraine is heavily dependent on imports of finished petroleum products, so the domestic price responds to European quotations, resource availability, logistics costs, and risks to supply routes," the expert explained.
Why prices may rise even after quotations decline
To answer this question, which confounds many Ukrainians trying to understand the issue, it is worth noting that retail prices respond to the external market with a delay. The fuel being sold to drivers at gas stations today may have been purchased when European quotations were at their peak. Therefore, even after they decline, operators continue for some time to receive more expensive batches and pass these costs on to the price displayed on the signs. The Ukrainian market observed such a situation in the second half of September: external quotations had already moved away from their highs, but Ukrainian storage tanks continued to be filled with more expensive supplies.
That is why a quick return to summer prices should not be expected, although as of September 21 there were already signs of some "cooling" in the wholesale market. Demand is currently weak, and some traders are selling supplies below the calculated replacement cost. However, new batches of diesel fuel remain expensive at current European prices.
Commenting on the situation, Leonid Kosyanchuk emphasizes that the issue of resource availability and the issue of its cost now need to be considered separately.
"There is no reason today to say that there will be no diesel fuel or gasoline. However, there is a problem with pricing. The main issue is not whether fuel will be available. The main issue is the price at which it will be offered," the expert explained.
He particularly emphasized that logistics costs, as well as insurance and security risks, are currently added to the external price of fuel. Due to problems along certain routes, traders are forced to change their supply routes. For example, using an alternative route through Moldova can add approximately $25–30 per tonne to the cost of the resource. Additional costs also arise because of delays at the borders or the need to reload the fuel.
Could panic buying push prices even higher?
Several days earlier, society reacted sharply to a call by Serhii Kuiun, director of the A-95 Consulting Group, to build up fuel reserves. One of the reasons was a possible shortage amid the situation on the global oil market and the intensification of russian armed forces’ attacks on gas stations. However, the expert later clarified that he was primarily referring to possible local disruptions caused by Russian strikes on fuel infrastructure. In his assessment, a total shortage like the one in spring 2022 is not expected at present. However, if a large number of consumers simultaneously go to gas stations and begin filling their tanks and additional containers to capacity, this could temporarily alter the balance. Stocks at individual stations would run out faster, forcing operators to urgently transfer resources between regions or purchase additional batches. If external quotations and logistics develop unfavorably, this could accelerate increases in retail prices.
Moreover, Kuiun describes preventing such a scenario as one of the purposes of building up reserves: the reserve should help weather a possible short-term disruption in supply without a simultaneous influx of consumers at gas stations. He stresses that there is currently enough fuel on the market, but does not rule out local disruptions.
However, expert Leonid Kosyanchuk категорically disagrees with him on this point. He explains that even before Russia’s full-scale invasion of Ukraine, the supply of fuel on the domestic market significantly exceeded demand for drivers. Unlike Finland, where gas stations are located at fairly considerable distances from one another and the number of fuel operators is limited, in our country dozens of networks offered and continue to offer their services through an extensive system of gas stations both in cities and outside them.
Therefore, the main near-term risk for truck and passenger-car drivers lies not in a physical shortage of gasoline or diesel fuel caused by the enemy destroying several dozen more gas stations. Difficulties may arise in other areas.
The first is an increase in the price of fuel for retail consumers because the cost of storing fuel in depots located outside Ukraine will be factored into it. Against the backdrop of intensified Russian attacks on infrastructure, operators are increasingly inclined to store significant reserves of gasoline and diesel in depots located in countries bordering Ukraine. Several months of renting such a hub cannot fail to affect the final cost of fuel at gas stations.
Secondly, according to Leonid Kosyanchuk, difficulties may arise with the timely delivery of gasoline and diesel fuel to Ukraine. Mobilization into the army has created a labor shortage in the field of drivers as well. It is currently quite difficult to find a man with a driver's license of the appropriate category and practical experience who could be entrusted with driving a fuel tanker. Involving men aged 60+ in this work could be dangerous for them themselves. After all, many people at this age already have chronic illnesses and may not be physically able to endure days of waiting in a fuel tanker's cab at the border, followed by a long journey carrying a high-risk cargo. Therefore, if the leading players in the fuel market fail to resolve the "staffing issue" in the near future, Ukrainians may soon face a fuel shortage due to delays in supplies.
What to expect from fuel prices in the fall
As Leonid Kosyanchuk explained in an exclusive comment to UNN, the baseline scenario for the coming weeks is the continuation of high and highly volatile prices. Diesel fuel remains at the greatest risk of further increases. If European quotations rise again, the UAH 100-per-liter mark may appear not just at individual gas stations, but at a significantly larger number of them. Market participants recorded potential for a further increase in retail diesel prices even after European prices retreated from their peak levels. If, however, the "retreat" in the external market continues and supply routes operate steadily, the increase in Ukraine may slow down or stop once networks sell through their more expensive stocks. However, an immediate price reduction should not be expected: retail prices respond to changes in cost with a time lag.
The situation with gasoline is somewhat calmer, although there is still little room for a sharp decline here either. Diesel remains more vulnerable because of the more expensive European supply and its greater sensitivity to disruptions in deliveries.
At the same time, according to the expert, fuel businesses and ordinary drivers should not place too much hope in assistance from the state, which will most likely not intervene in pricing policy in any way. This differs from European countries, which are reducing the tax burden on fuel in the face of the threat of an energy crisis.
Recall
On September 17, Ukrnafta and SOCAR raised fuel prices twice.