Why there will be no cheap autogas in Ukraine Victor Medved.

Since September 26, the price of autogas at gas stations has fallen by an average of 20 kopecks per liter. However, over the past three months, it has been steadily rising in price, reaching UAH 13. At the beginning of July, it was possible to fill a car with gas for UAH 8 per liter. Experts predict that this is not the last price increase and that Ukrainians will start switching from gas to gasoline and diesel starting next year.

Demand exceeded supply

Over the past two years, the cost of gasoline and diesel fuel has almost tripled. This has encouraged Ukrainians to look for a more economical fuel, which is liquefied natural gas. "The current volumes of liquefied gas consumption roughly correspond in percentage terms to those planned by the former energy strategy of Ukraine for the period up to 2030. That is, it is 15% of the retail sales of all octane fuels," said Gennadiy Ryabtsev, an energy expert. Ukraine cannot meet the demand for autogas with its own production. The monthly consumption rate of liquefied gas at gas stations reaches more than 100 thousand tons. Therefore, 80% of the fuel has to be imported. The main suppliers of liquefied gas to Ukraine are Belarus and Russia. Until recently, they accounted for 99% of all imported gas. However, since the summer, supplies have dropped significantly and a fuel shortage has emerged on the Ukrainian market, experts say.

"This situation arose due to problems with fuel supplies from Russia. A large liquefied gas production unit there that produced 700 tons of raw materials from which liquefied gas is made went out of order," explained Leonid Kosyanchuk, President of the Association of Oil Market Operators. At the same time, both Belarus and Russia have reoriented their own production to the domestic market, noted Gennady Ryabtsev. Therefore, it is possible that the volumes of gas imported from these countries will not return to previous levels. The expert added that Ukrainian traders are to some extent to blame for this, as they do not sign long-term and medium-term contracts for the supply of this resource. That is, they buy only the surplus that is formed on the free market. "Why are there no such contracts? Because the market is closed, dominated by a few companies that order music. That's why they don't care what the price is, because Ukrainian consumers who have switched to using this fuel have no choice. Either buy gas, which is getting more expensive, or switch to gasoline, which is even more expensive," Ryabtsev said. Domestic LPG producers immediately took advantage of the situation. The rush of demand during the shortage led to an increase in the cost of fuel on the wholesale market. "Our producers reacted accordingly and began to raise prices in the wholesale segment for their own product. The penultimate auctions ended at UAH 20,500 per ton and UAH 21,700 per ton. That is, we have already exceeded the price of diesel fuel," said Leonid Kosyanchuk. Gas will become cheaper, but not for long The shortage of liquefied gas on the Ukrainian market has led to an increase in prices for this fuel at 30% gas stations. As early as October, due to a decrease in demand and a drop in temperature (at low temperatures, the technical capabilities of a gas-fueled car are worse), the price of autogas may drop to 11 UAH/l, Ryabtsev predicts. However, the price drop is likely to be short-lived. "Now more and more LPG will be imported from European countries and, accordingly, the price will depend more and more not only on domestic demand levels, but also on the hryvnia exchange rate against the US dollar and the euro, for which these new batches from Lithuania, Poland, Romania, and Egypt will be purchased. The price will be higher for sure, because the transportation leverage is higher there, and it is generally more expensive because the excise tax is much higher than in Belarus and Russia," Ryabtsev said. Buying autogas in Europe will also be difficult, experts say. Global demand for this fuel is growing significantly, as more and more countries use liquefied gas for heating. At the same time, the expert states that the companies themselves are not interested in lowering prices. "It makes no sense for companies operating in a closed market to significantly reduce prices, because it will not affect sales volumes in any way. It is likely that the current prices will remain until next spring. When there is no or insufficient competition in this market, there is no reason to talk about companies' interest in lowering prices," Ryabtsev said. Instead of fuel, they sell unknown things Only gas stations operating illegally can afford to reduce gas prices. Currently, there are one third of them on the LPG market, and their number is growing every year. "We see that over the past two years, more than 500 different filling stations have been set up in Kyiv, most of which do not have cash registers at all. That is, they sell as they sell. Despite the fact that this is an excisable good and there is an excise tax on retail trade, which is about UAH 1.2 per liter," said Kosyanchuk. According to Gennadiy Ryabtsev, this situation has arisen because Ukraine has not yet established a body that would supervise the petroleum products market. "There is still no market supervisory authority in Ukraine, I mean for gasoline and diesel fuel. By the way, this is contrary to Ukraine's commitments made when signing the Association Agreement. As for the liquefied petroleum gas market, even technical regulations have not yet been introduced," Ryabtsev said. The Antimonopoly Committee is perhaps the only body that can somehow control the liquefied petroleum gas market under such conditions. Back in July of this year, the Committee did launch a study of the compliance of the price situation in the liquefied gas market. At that time, the authority provided 40 business entities with recommendations to "take measures to prevent violations or eliminate signs of violations of the legislation on the protection of economic competition," the AMCU website said. At the same time, the committee is still conducting research on the liquefied gas market. However, even if violations are found, it is unlikely that the perpetrators will be punished, said Viktor Medvid, director of William invest expert consulting company. "There are big problems with the quality of the Antimonopoly Committee's work. Even those investigations that the Antimonopoly Committee conducts, most of them sink in the courts, and the Antimonopoly Committee loses these cases due to unprofessional, poor quality policy," Medved said. Car owners will return to gasoline and diesel Thus, in the absence of domestic production of liquefied gas and the shortage of imported fuel, consumption of liquefied gas will also gradually decrease, said Gennadiy Ryabtsev. "Most likely, the consumption of liquefied petroleum gas will decrease from the current 1.2 million tons per year to about 700-650 thousand tons, as it was a few years ago, when domestic production took about 60-70% of the consumption level in this market," Ryabtsev said. Ukrainians themselves will also refuse to buy relatively expensive gas. Despite the fact that gas is still cheaper than gasoline or diesel fuel, its consumption is 1.2 times higher than that of the same gasoline for the same distance. In addition, in winter, a gas-fueled car loses its technological properties due to low temperatures: it is harder to start and drive. That's why, according to experts, many consumers refuse to use liquefied gas in the cold season anyway. And with the rise in fuel prices, those Ukrainians who were planning to convert their cars to use this type of fuel are likely to abandon the idea. "If we say that liquefied gas is attractive when its price does not exceed 55% of the price of high octane (gasoline - Ed.), then today this norm has already been crossed, today it costs 58% of the cost of high-octane gasoline, and therefore I can predict that demand will decline, especially among those people who know how to calculate that at this price, LPG is no longer as attractive as it was before, and it has no advantages over 95 gasoline," said Leonid Kosyanchuk. "Those consumers who use dual-fuel cars with gasoline as the main fuel and LPG as an additional fuel will gradually return to gasoline. And they will use the cheapest possible gasoline, which is sold by stations in the lower price range, because the solvency of Ukrainian consumers, unfortunately, continues to decline," Ryabtsev predicts. According to the expert, Ukrainians are currently at the lowest level among all European and CIS countries in terms of their ability to buy gasoline. On an average salary, a resident of our country can buy 3 to 5 times less gasoline than an average Belarusian or Russian can buy, and much less than an average German.