Gasoline Price Jump: Provoked by official "good intentions"

Among the main reasons are lack of legal regulation of the market (e.g., excise) and the sharp fuel price jump in Russia (from which Ukraine receives over half of the petroleum derivatives consumed by this country).

According to the Finance Ministry's Consumer Price Oversight Inspectorate, the highest diesel fuel price rise this May was registered in Dnipropetrovsk (30-50%), Volyn, Mykolayiv, and Kherson oblasts (10-15%). A-76 gasoline rose highest in Dnipropetrovsk, Ivano-Frankivsk, and Luhansk oblasts (10-25%); A-95 in Kirovohrad, Luhansk, Khmelnytsky, and Chernivtsi oblasts (10-19%).

In Kyiv, all these prices remained stable in May. In fact, the capital is the only place in Ukraine where the costs of certain oil derivatives are regulated by the state administration; the ceiling for diesel fuel is set at 80 kopiykas per liter and A-76 at 90. At the beginning of June unregulated gasoline prices went up sharply. At certain filling stations No. 95 has leaped from 1 to 1.22 hryvnias a liter over the past few of days.

Experts of the Psikheya research-and-technology center specializing in domestic oil market studies believe that lack of legal regulation of the market is one of the main reasons for the price jump. "As a result, the importers switched to small supplies to reduce the risk. Reduced supply, of course, causes increased demand, raising the prices," they informed the Center for Journalistic Research.

For half a year Parliament and President have not been able to come to terms on the excise tax on petrochemicals. If the Solons propose to lower it Mr. Kuchma wants at best to leave it the way it is. Last summer, he signed the edict On the Rates of the Excise Tax on Petrochemicals, imposing 40-100 ECU per ton of gasoline (depending on the brand) and 15 ECU per ton of diesel fuel. The executive's adamant stand is explained by the Cabinet's concern about budget losses resulting from lower excise rates.

Vyacheslav Sokerchak, First Deputy Chairman of the Verkhovna Rada Finance and Banking Committee, considers that the budget received no additional revenue from increased fuel excise (the intended amount was UAH 500 million). Instead, quite some damage was done, since Ukraine's high excise rates (compared to neighboring countries) "results in the reduction of legal imports, as last year's taxable sales of excisable petrochemicals went down two times," he adds.

More evidence of reduced petrochemical supplies is the unofficial information that the government is substantially lowering fuel supplies for the sowing campaign. In addition, the Ukrainian market cannot but be affected by rising gasoline costs in Russia. According to the Russian Business Consulting Center, Premier Sergei Stepashin declared that, while in May uncontrollable gasoline costs showed a 7% increase, in June it had reached 23%. Mr. Stepashin ordered the working out of urgent measures to prevent the "ungrounded gasoline price increase" last Thursday.

A Finance Ministry source explained to The Day's Vitaly KNIAZHANSKY that the President's and Cabinet's attack on joint ventures has played an important role in reducing refined oil supplies to Ukraine. After these companies were refused tax concessions, imports registered a sharp drop (two times in the first quarter, then plummeting in April). Moreover, the war in Yugoslavia (this source added) pushed up world crude oil prices by 50% and of refined oil by 35%. However, the main reason for the panic on the Ukraine is the absence of coordination between the legislative and executive. At present, every enterprise accrues the excise tax however it sees fit - either under the President's edict or under the law canceled by the Chief Executive. And the consumer suffers most, of course. In fact, this price jump may affect such basic goods as milk and bread any day, for these products have to be delivered, which takes gas.