Rising Fuel Prices in Ukraine: Causes and Consequences
The key reason for the increase in fuel prices in Ukraine is the situation in the European market, which directly affects the country. Despite this, the Ukrainian market remains stable with no fuel shortages, and prices are still lower than in most European Union countries, thanks to the government's cashback initiative.
The primary driver behind the rising fuel prices in Ukraine is the current state of the European market, which has a direct impact on the country. According to the Ukrainian Oil and Gas Association (NAU), the market in Ukraine is operating steadily, with no fuel shortages reported, and prices remain lower in absolute terms compared to many European Union countries, largely due to the implementation of a state cashback program.
The Association clarified that the main factor influencing the increase in fuel prices is the situation in the European market. Following the complete loss of oil refining infrastructure due to the full-scale war, Ukraine has shifted to importing finished fuel. Consequently, prices for petroleum products in Europe have become the determining factor for Ukraine, rather than crude oil prices.
Among the reasons contributing to the rising fuel prices, the Association identifies several key factors. Firstly, there is geopolitical tension surrounding the Strait of Hormuz, which is one of the main routes for global oil supplies. Secondly, there is increased demand in EU countries as they actively build up reserves. Other significant factors include the seasonal agricultural work, rising logistics costs, fluctuations in exchange rates, and the tax burden, which constitutes about 38-42% of the price per liter of fuel.
Despite the rising prices, fuel in Ukraine remains cheaper than in most EU countries. For instance, in Germany and France, the price of gasoline is equivalent to 103 UAH per liter, while diesel costs 113 UAH per liter. In Poland, gasoline is priced at 86 UAH per liter, and diesel at 96 UAH per liter.
In comparison, the price of gasoline in Ukraine is approximately 71.7 UAH per liter, and with the state cashback, it is around 64.6 UAH per liter. Diesel is priced at 84.6 UAH per liter, and with the national cashback, it drops to 72 UAH per liter, as emphasized by the Ukrainian Oil and Gas Association.
“To support consumers, the government has introduced cashback mechanisms that partially compensate for fuel expenses and reduce the financial burden on the population and businesses. The state cashback returns between 5% and 15% of the fuel cost, depending on the type of fuel. As a result, Ukrainians are paying 25-40% less than in neighboring EU countries,” the NAU noted.
It is worth mentioning that Ukrainian President Volodymyr Zelensky initiated the “National Fuel Cashback” program, which came into effect on March 20. Under this program, Ukrainians can receive a portion of their money back for refueling their vehicles: 15% for diesel, 10% for gasoline, and 5% for gas.
Thus, despite the increase in fuel prices, Ukrainians have the opportunity to reduce their expenses through government support programs designed to alleviate the financial burden on the population and businesses during these challenging times.