No sooner had the Ukrainian drivers to rejoice depreciating fuel, how it can rise again. Not because of high global oil prices or due to the expensive dollar, which it purchased abroad more than 80% of fuel on the domestic market. No, Ukraine can impose new duties on imported oil products to protect domestic producers, which would raise prices at the pump.
The website “Today” to figure out how the duties will affect the fuel market in Ukraine and in the pocket of a single Ukrainian.
Why do you want to impose duties
In the Interdepartmental Commission on international trade (mkmt) under the Ministry of economic development a complaint was filed from the largest Ukrainian producers of fuel. Their names at the hearing, but in this case it doesn’t matter, because it’s not in names and in numbers. Here is their something we will not only detect, but analyze.
In his complaint, the manufacturers are asked to conduct anti-subsidy investigation and to impose duties on Russian diesel fuel and liquefied gas at a rate of 8.46% higher in the five years to 25.4%. The main argument of the manufacturers is dumping by Russian exporters due to state support.
For reference: anti-subsidy investigation is applied when imported into the territory of Ukraine the goods supported an illegitimate subsidies in the country of origin. The consequence of the investigation is the application of compensatory measures – for example, the increase in duties. The duration of the anti-subsidy investigation – to a year.
What authorities say
The Department of protection of the national producer Minekonomrazvitija we were told that complaints of this kind, it deals with their office with involvement of specialists of other ministries. And explained that such documents require long study, so it is unclear what would be the result.
The final decision on increase of duties was adopted by the Cabinet, if mkmt recommends to raise them. If not encourages, the question to the government is not made.
What do the numbers say
While in high offices decide to impose duties or not, we asked the experts of the fuel market to evaluate the arguments set forth in the complaint.
“The argument of dumping does not correspond to reality, – said the Director of Consulting group “A-95″ Sergey Kuiun. – Imported petroleum products, including Russian, sold to Ukraine at a premium to world prices (that is, more expensive – Ed.). So, in 2020 the Ukrainian company has signed contracts for Russian fuel oil with a premium to the European quotes to $35/ton, for liquefied gas – up to 22 $/ton. This is due to the fact that Ukraine remains import-dependent country: in 2019 the import of diesel fuel was 88% in the national balance sheet, liquefied natural gas – 78.5 per cent”.
The introduction of duties on Russian liquefied natural gas up to 25% of the cost, according to Sergey Kuyun, will have for our market no consequences, except for proportional growth of prices in the wholesale and retail. After all, the system of deliveries will remain the same due to the lack of alternatives to Russian imports.
According to analysts “A-95”, in the first stage the imposition of duties (8,46%), the growth of prices for diesel fuel will amount to a minimum of 1.1 UAH/l, liquefied gas – UAH 0.55/L.
“That on a national scale will mean an increase in costs for consumers by 11.5 billion a year, based on current minimum prices in the world market, – said Sergey Kuiun. Is a plus to the tariffs for passenger and cargo transportation, the minus to the competitiveness of Ukrainian industry and the solvency of the population”.
The Deputy Director of the Scientific-technical center “Psyche” Gennady Ryabtsev predicts that in the case of the introduction of the proposed duty of 8.46%, import from Russia will completely stop. This will lead to increased pressure on remaining sources of supply, primarily to Belarus, whose share will increase from the current 35% to 60% of the market.
The ability of Ukrainian manufacturers restricted two-fold increase of processing, which at best will increase market weight from 12% to 25%.
“The impact of fees on prices was demonstrated in 2019, when the special duty on pipeline supplies of Russian diesel fuel caused a rise in contracts for the year 2020 for imported and Ukrainian DT $10/ton” – recalled Gennady Ryabtsev.
The main impact will have on agriculture, which will be forced to increase the cost of diesel following a sharp growth of prices for mineral fertilisers due to the introduction in 2018 of protective duties on Russian fertilizer.
What the experts say market
Sergey Kuyun is sure that the introduction of import duties on diesel fuel and liquefied gas is not the best way affect the current structure of the oil market in Ukraine.
“The duties will increase prices, will weaken competition in the market and will not solve the problems of the Ukrainian oil refineries, – said Sergey Kuiun. The most critical implications of the duties will feel the diesel fuel market, which accounts for 70% in the basket of motor fuels.
Given the high import dependence in Ukraine built the only correct supply of oil: the market as open as possible, to ensure enhanced competition between foreign and domestic suppliers, and this guarantees the best price. The proposed introduction of fees would ruin this design, will lead to higher prices and increase the risks of failure in providing fuel”.
Gennady Ryabtsev said that it is necessary to wait for the official publications of the economic justification for raising taxes and the statement of the Ministry of economic development on the investigation, and only then to draw conclusions.
“While Ukrainian producers are not saying anything about the price increase on its products, – said Ryabtsev. But it is logical to assume that the increase is, as imported fuel will rise in price. To it will inevitably catch up and the price tags at the gas station that sells Ukrainian brands – the market is the market, why to sell cheaper if the demand is there and you can sell more?”
But Ryabtsev optimistic: according to him, the leadership of our country will not allow the new explosive growth in oil prices after their reduction, so you reject the complaint, primarily for political reasons. The expert also says that such protective duties can cause not only complaints from the Russian Federation to the WTO for violation of free trade, but the imposition of retaliatory duties mirrored in relation to the Ukrainian goods imported to the Russian Federation.
“But there are arguments in favor of a possible imposition of duties: we did not budget for is performed by the income, and now Ukrainian producers are asked to protect them from foreign imports, lifting duties, which will replenish the Treasury. As the saying goes: “two in one”. Therefore, a positive decision on duties is not excluded. Although, if you adopt them, the supply of Russian diesel fuel will cease, and the budget won’t get anywhere. In addition, traders will have to think what to replace supplies from Russia. Liquefied gas will be imported, but with the fees it will cost more. In the end, pay for all the consumer”, – says Gennady Ryabtsev.
Co-chair of the energy strategies Foundation Dmytro Marunych believes that protective duties is lobbying, which will lead to higher prices for diesel fuel approximately UAH per liter of liquefied petroleum gas is 50-60 cents per liter.
“The current situation of large volumes of fuel imports to violate the protective tariffs the existing balance seems to me a questionable decision. Not to mention the fact that the price increase will hit the pockets of consumers, this negative effect fully block possible positive for Ukrainian producers of fuel,” explains Dmitry marunich.
What to do
“To increase the efficiency of production to the owners of the Ukrainian enterprises need to actively invest in increasing the depth of processing. But this does not mean that our plants don’t need help. Just the authorities should find a compromise when you solve the problem will be everything, not only the market and consumers,” – said Sergey Kuiun.
That with the introduction of fees or without the Ukrainian oil refineries can not do without the modernization of production, according to Dmitry marunich.
“The owners of the refineries need to increase production of diesel fuel and lower its cost, – said Dmitry marunych. But this cannot be done without a multimillion-dollar investment in the modernization of production, allowing to increase the oil processing depth. If you are prompted and executed the real program of modernization of the Ukrainian “diesel” will be more, its imports will decrease and the issue of duties will become irrelevant”.