Fuel Prices in Ukraine Surge: What Is Driving the Market and Why Gasoline Costs Are Rising
The beginning of March brought a sharp increase in the cost of gasoline and diesel fuel at Ukrainian filling stations. Within a few days prices rose by approximately 4-5 hryvnias per liter, and at some stations the price of A-95 gasoline exceeded 70 hryvnias. At the same time political rhetoric from Hungary intensified, while tension on global markets increased due to military developments in the Middle East.
Time for Action analyzed what exactly influenced the fuel market, why prices are rising so quickly, and whether there are grounds to speak about possible speculation.
Hungarian Prime Minister Viktor Orbán announced the suspension of fuel supplies to Ukraine and linked this decision to the demand to restore the transit of Russian oil through the Druzhba pipeline. He also threatened to block the transit of important cargo for Ukraine through Hungarian territory. The statement was particularly harsh:
“We have stopped supplying gasoline to Ukraine, as well as diesel fuel… Ukrainians will run out of money sooner than we run out of oil.”
Such rhetoric demonstrates the use of energy resources as an instrument of political pressure. Hungary insists on restoring the transportation of Russian oil, which is directly connected to the interests of its energy sector.
Price jump at filling stations
In the first days of March Ukrainian drivers saw noticeable changes on fuel station price boards. The average price of A-95 gasoline reached 67.20 hryvnias per liter. Premium gasoline costs more than 71 hryvnias, while diesel fuel is around 67.40 hryvnias per liter.
Prices are even higher at some popular networks. At certain stations A-95 gasoline is sold for almost 72 hryvnias per liter, while premium fuel costs around 74 hryvnias.
Overnight prices increased by about 2 hryvnias, and within several days the total increase reached 4–5 hryvnias. After that, social networks reported queues at some filling stations, although no widespread panic buying was observed in most cities.
What is happening on the global market
One of the reasons for the increase is the military escalation in the Middle East. A joint military operation by the United States and Israel against Iran has increased nervousness on the oil market. The region remains one of the key centers of global oil production. Any attacks on infrastructure or threats to shipping immediately affect prices.
Iranian attacks on oil infrastructure and threats to civilian vessels near the Strait of Hormuz have raised concerns about potential disruptions to supply. About 20 percent of global oil transportation passes through the Strait of Hormuz. Therefore even the risk of restrictions on shipping can cause sharp fluctuations on the market.
Benchmark Brent crude currently trades slightly above 81 dollars per barrel. Serhii Kuiun, director of the consulting group A-95, explains that markets are reacting primarily to uncertainty.
“Markets are nervous about further supplies from the region.”
According to the expert, turbulence on the international market affects European refineries and traders from whom Ukraine purchases fuel.
“The Orlen-Lietuva refinery, the Lithuanian subsidiary of the Polish concern Orlen, sent price lists and the price of diesel fuel increased by 6.5 hryvnias per liter. Just in one day. It was not Ukrainian traders who raised the price – they were simply offered such prices.”
Why some experts speak about speculation
Not all analysts agree that the international situation is the main reason for the price increase.
Energy expert Hennadii Riabtsev stresses that the current global oil price level is roughly the same as last year.
“Therefore what is happening now on the Ukrainian market is purely speculation. It has no economic justification and it is simply mockery of Ukrainian consumers.”
According to his estimates, even considering exchange rate changes and excise taxes, gasoline prices could have increased by a maximum of about 2–2.5 hryvnias. Instead, the actual increase has reached approximately 4–5 hryvnias.
Questions about competition on the market
Additional concerns arise because several major filling station networks raised prices simultaneously and by almost identical amounts.
Economists note that fuel prices usually react to changes in oil prices with a delay of around twenty days. This is the time required for refining, transportation, and delivery of petroleum products.
“It does not happen automatically and instantly.”
For this reason some experts believe the situation should be examined by the Antimonopoly Committee.
Reaction of parliament
The sharp increase in fuel prices was also addressed by the head of the parliamentary committee on finance Danylo Hetmantsev. He publicly called on fuel businesses to explain the reasons for such a jump.
“In a country at war, where half the country relies on generators, such a powerful business as yours also has a certain social responsibility that does not allow the use of panic sentiments for excessive profits.”
After that an appeal was sent to the Antimonopoly Committee requesting a review of the situation.
What the regulator says
The Antimonopoly Committee reported that it has already begun collecting information from market operators. Companies must explain the reasons for the increase in fuel prices.
The regulator emphasizes that fuel prices in Ukraine are not regulated by the state and are formed by the market. Since the country fully depends on imported fuel, fluctuations in international prices quickly affect the domestic market.
Position of filling station networks
One of the major fuel station networks stated that the price increase is a direct consequence of the international market situation.
“Changes in fuel prices in Ukraine directly depend on global quotations for oil and petroleum products.”
The company explained that new batches of fuel are purchased at current market prices, which have risen sharply after the escalation in the Middle East.
Is a fuel shortage possible
Despite the price surge, experts do not predict a fuel shortage. According to analysts, global oil production currently exceeds consumption by about three percent.
“There is a lot of fuel in the world and buying it is not a problem. It is a matter of price.”
Therefore the main risk for the Ukrainian market lies not in the availability of resources but in the cost of imported supplies.
Can prices decrease
Some analysts believe that after tensions on global markets ease, prices could return to lower levels.
“As soon as there are real reasons for prices to fall, they will fall.”
However other experts are more skeptical and note that large fuel networks have significant influence on the market.
The Ukrainian fuel market is currently affected by several factors at the same time. Geopolitical tension in the Middle East has influenced global prices. Political statements from Hungary have created additional uncertainty. Inside the country questions have emerged about possible coordination of pricing among major filling station networks. Whether the sharp increase in fuel prices is a market reaction to global developments or the result of internal speculation will ultimately be determined by the investigation of the Antimonopoly Committee.
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