New Oil Crisis on Horizon?

In Ukraine, wholesale prices for oil products are rising. As Ukrayinski Novyny reported, some of the companies have raised wholesale prices for A-95 gasoline from UAH 1600 to 1700 per ton, A-76 from UAH 1400 to UAH 1450, and diesel fuel from UAH 1050 to UAH 1120 a ton.

Manager of the Alfa-Nafta Company Maryna Fedotova told Ukrayinski Novyny, “It seems to me that there are no realistic, good offers on the market, where realistic fuel is offered and can be shipped within two days without problems.”

What caused the beginning of failures in the oil products market is not difficult to discern. “Imports decrease automatically as the dollar exchange rate grows, and, second, [due to] the uncertainty of the situation (caused by the presidential elections), people are not too eager to import oil products here,” Atek-95 head of department Anatoly Chmilenko told the information agency. In addition, last October saw a drop in the Ukrainian oil refining volume by 33.5% (compared to October 1998). Kremenchuk Refinery (Ukrtatnafta Co.) had a 36.8% reduction, Naftokhimik Prykarpattia 34.7%, and Odesa Oil Refinery 53.9% reduction (due to scheduled repair). The Kherson Oil Refinery worked only two days in October. The only exception was the Halychyna Refinery, which increasing refining volume by 40.1%, but that could not offset the downturn with other companies.

According to specialists of the Ukrnaftokhimpererobka Association, the Ukrainian refineries’ production decline is caused by increased prices for crude oil supplied to them. In August and September prices rose by 23-25% (from $105-110 to $130-135 a ton), and in October, by another 5-8% to $136-140.

On the eve of the elections, the Oil Products Supply Workers Association told The Day that despite the hryvnia’s fall, Association members are doing their utmost to hold back prices for oil products. But they think that a crisis on the market is brewing, because the inexpensive product reserves of joint ventures, whose tax and customs privileges were banished, will last three months at most.