Autogas in Ukraine is getting more expensive: what is the reason and what should drivers expect next

In Ukraine, the cost of autogas has risen again at some filling stations. At the same time, starting January 1, an additional factor driving up fuel prices may be an increase in the excise tax. Energy expert Hennadiy Ryabtsev told UNN’s journalist more about why autogas is becoming more expensive right now and what affects its price level.

Why autogas is becoming more expensive right now

On Wednesday, October 21, several major filling station networks once again revised fuel prices in Ukraine. In particular,  OKKO, WOG and "Ukrnafta" raised the price of autogas by UAH 1, while UPG increased it by 40 kopecks. Diesel and some gasoline grades also became more expensive.  An energy expert identifies seasonality as the main reason for the increase in autogas prices. He explains that Ukraine does not have its own production of liquefied petroleum gas in the volumes needed to meet market demand, and therefore depends on imports.

This means that the country currently has no domestic production of liquefied petroleum gas. Therefore, it has to import it. Where is it imported from? From countries where this liquefied petroleum gas is used not only as automotive fuel, but also as fuel for boiler houses 

In addition, with the onset of cold weather, demand for heating gas increases, so motorists are forced to compete for the same resource with other consumers, which in turn creates a supply shortage and pushes prices upward. According to the expert, this situation has been repeating for years, as long as Ukraine remains dependent on imported supplies.

If we look at how liquefied gas prices behaved throughout all the years when imports were our main source of supply, we can see that whenever competition between consumers increases—that is, between motorists and those who use this gas as fuel for boilers—we always face a shortage of this resource and its price rises 

Is there an autogas shortage in Ukraine

According to the expert, autogas can currently be purchased, although drivers have to pay more.

As far as I know, autogas can be bought at a high price. In other words, it is available at filling stations. But the price is certainly high 

At the same time, the current cost of gas is still not high enough compared with gasoline to cause a significant reduction in consumption. According to Hennadiy Ryabtsev, a liter of gasoline usually costs approximately as much as two liters of autogas, while now, he says, the price ratio is around 53–55%; a noticeable decline in demand usually occurs after it exceeds 65%.

When the ratio between gasoline and liquefied petroleum gas exceeds 65%, consumption usually declines significantly because there is then almost no financial benefit from using this resource if the car has a dual-fuel engine 

How logistics and the war affect prices

As the expert explains, Ukraine imports autogas mainly by road and rail. After the start of the full-scale war, supplies from Belarus, Russia and Kazakhstan ceased, narrowing the choice of import sources. At the same time, the delivery process itself has not changed significantly, while transportation costs have increased, in particular because of the higher price of diesel fuel used to refuel gas carriers.

Logistics has not changed significantly because it was already like this even before the war. There were problems, of course, after the war began, because much of the supply used to come not from Poland but from Belarus. Belarus was our main supplier of liquefied petroleum gas, followed by Russia, Kazakhstan, and then European countries 

As Hennadiy Ryabtsev noted, more expensive transportation also affected the final cost of gas. However, the current price surge should not be explained solely by international events or the situation on the oil market, because the main factor right now is competition for the resource during the heating season.

This has nothing whatsoever to do with Iran, Saudi Arabia, Kuwait, or any other countries, because that is not where our liquefied petroleum gas comes from. The increase was driven by growing competition among consumers—motorists and households that use this gas to generate heat. The heating season has arrived, and it has become cold indoors 

Could autogas become cheaper in the near future

There is currently no reason to expect a rapid decline in autogas prices, explains Hennadiy Riabtsev. As the weather gets colder, the need for gas for heating in supplier countries may increase, which would limit the availability of the resource for the Ukrainian market. In addition, according to the fuel-market expert, starting January 1, the excise tax on petroleum products, including liquefied petroleum gas, is also set to increase.

There are no objective factors indicating that any decline should be expected. Winter is not ending; on the contrary, more of this same liquefied petroleum gas will be taken for household needs in Poland. And less will remain for us 

However, in winter, demand for autogas among drivers may instead decrease, because when temperatures outside are low, starting engines on gas becomes more difficult for drivers.

When the ambient air temperature falls below zero, using liquefied petroleum gas in ordinary cars equipped with the appropriate fuel system is impractical because problems arise when starting the engine. Therefore, demand for this petroleum product decreases in winter, especially at low temperatures. And this limits the price increase