What's actually behind rising fuel prices — and what no government can fix

A view of the vessels heading towards the Strait of Hormuz following the two-week temporary ceasefire reached between the United States and Iran on the condition that the strait be reopened, seen in Oman on April 8, 2026. (Shady Alassar/Anadolu via Getty Images) Prefer on Google Volodymyr Petrenko Founder and Owner of Ukrainian Petroleum Group The escalation in the Middle East has sent shockwaves through the global energy market. Probably, the last time most consumers filled their tank, they didn't even think about the Strait of Hormuz. After the U.S. and Israel struck Iranian facilities , Tehran responded by closing the Strait of Hormuz, the narrow corridor through which a third of all maritime fuel shipments pass,  effectively triggering a countdown to a potential global energy crisis. The region holds half of the world's oil reserves and accounts for up to 30% of global production, and for more than a month, this critical hub has been at the epicenter of military conflict. The consequences appeared almost immediately: petroleum product prices rose by more than $400 per ton, with Brent crude stabilizing above $100 per barrel. Any news coming from the Middle East now oscillates prices on the markets daily. The situation remains highly fluid, and shifting statements continue to reverse part of these moves. Military-political risk has become a permanent new variable in the global energy equation. For most countries, this remains a systemic shock. For Ukraine , it is a significant storm: a country already at war, now has to address a global energy crisis and surging fuel prices all at once. Since 2022, Kyiv has reoriented its fuel imports almost entirely toward EU suppliers — but this came at a structural cost. Ukraine has no domestic fuel production to fall back on. It imports everything, stores relatively little, and is in the middle of raising fuel taxes to meet European standards. After the destruction of our oil refining industry and large storage facilities, we are forced to operate on a "just-in-time basis." Every shipment from the EU or the U.S. is purchased at current, often peak, global prices and immediately distributed to retail outlets. Without a domestic "safety stock," any global crisis hits Ukrainian pumps instantly. European exchange quotations for petroleum products remain the key benchmark for the market. They determine the wholesale prices of gasoline and diesel, which are then incorporated into the cost of supplying Ukraine. During periods of heightened uncertainty, suppliers add risk premiums to contracts — and this effect is immediately reflected in the price of new deliveries. At the same time, the tax component remains a separate structural factor that operates independently of market conditions. At the beginning of 2026, an increase in excise taxes added around Hr 4 (about $0.09) per liter of fuel, regardless of fluctuations in global quotations. A similar pattern was observed earlier: following the Middle East escalation in 2025, fuel prices in Ukraine also increased by about Hr 4 (about $0.09) per liter and did not return to previous levels even after global oil prices declined. In a broader context, this reflects another important trend. Ukraine is also gradually adopting the European model of fuel taxation, in which taxes constitute a significant share of the retail price. For comparison, excise taxes in Poland amount to 0.42 euros (about $0.45) per liter, in Germany 0.66 euros (≈ $0.71), and in the Netherlands 0.84 euros (about $0.91). Ukraine's rates remain lower but are steadily converging with European levels — meaning taxes will increasingly shape fuel prices alongside global market trends. Ukraine's experience reflects, in a concentrated form, what is happening in many energy-importing countries. In Pakistan, the government has restricted consumption,  from shorter workweeks to fuel rationing. Egypt raised prices by 15–22% to stabilize public finances. In Europe , fuel prices hit a 40-month high, forcing governments to seek ways to ease pressure on consumers. (Photo for illustrative purposes) Crude oil processing facilities on the site of PCK-Raffinerie GmbH. (Patrick Pleul/picture alliance via Getty Images) Diesel prices in the EU have risen on average by 25% since the escalation, with even steeper increases in some countries: Spain saw a 35% increase, Hungary and Italy temporarily cut excise taxes, and Croatia and Slovakia introduced price caps. France, Greece, and Slovenia took other regulatory steps. Even South Korea imposed a retail price ceiling for the first time in nearly 30 years. In the U.S. , the prices increased by 33%. Ukraine has launched a state fuel cash-back program designed to partially reimburse consumers and mitigate price volatility while preserving market-based pricing mechanisms. All major fuel retailers joined the program on the day of its launch, and early results confirm that it is effectively delivering on its core objective — offsetting fuel costs for end consumers. This is especially significant for those who depend on fuel daily: working individuals, small business owners, and farmers, for whom it remains an essential and indispensable resource. At the same time, the experience of different countries shows that, regardless of the tools chosen, none of these measures change the fundamental market logic. They may mitigate the consequences, but they do not eliminate the cause — dependence on global prices and supply constraints. The real challenge today is understanding how price formation works under such volatility. The key principle is that pump prices are determined by expected future costs, not past ones. Operators set retail prices based on the anticipated cost of the next shipment. If wholesale prices rise, retail prices are adjusted in advance to ensure supply continuity. When demand outpaces exchange supply, prices climb rapidly, generating a so-called "risk premium." The recent ceasefire announcement in the Middle East has already produced tangible effects at the retail level. Ukrainian operators have already reduced diesel prices in direct response to improving market conditions — following a similar reduction made the previous week. This is the market functioning as it should: when global benchmarks ease, retail prices follow. However, the situation remains unstable. Events in the Middle East are evolving rapidly, and even with a ceasefire in place, significant risks remain — including the possibility that Iran could again use closure of the Strait of Hormuz as a lever of political pressure on the U.S. and the global economy. Markets remain acutely sensitive to political signals from all parties to the conflict, and price dynamics can shift in either direction with little warning. Goldman Sachs analysts project some easing of pressure by the end of 2026 — but only if geopolitical tensions genuinely de-escalate and shipping through the Strait of Hormuz normalizes on a sustained basis. For Ukraine, this global logic arrives on top of a cost structure that has no peacetime equivalent. Our fuel market is operating under conditions it was never designed for. Prices reflect real costs. Understanding this distinction matters because the wrong diagnosis leads to the wrong response. Until conditions stabilize, the priority for operators remains ensuring the physical availability of fuel. Supply continuity is a foundational condition for economic functioning — price, in this context, is just a measurement of the environment in which the market is operating. To ensure there is no miscommunication with the public, the operators and the government should remain transparent about their actions and price-setting. The market, left to function without distortion, will find its level. The task — for operators, for government, and for partners — is to ensure it has the conditions to do so. Editor's note: The opinions expressed in the op-ed section are those of the authors and do not purport to reflect the views of the Kyiv Independent. Founder and Owner of Ukrainian Petroleum Group