Why is gasoline becoming more expensive? Why is petrol becoming more expensive in Ukraine?

2024 Author: Erin Ralphs | [email protected]. Last modified: 2024-02-19 11:42

Steady increase in gasoline prices upsets motorists. What causes the rise in fuel prices and under what conditions is their decline possible? Here are five reasons why gasoline is getting more expensive.

A joke is common among the people: if oil rises in price, then gasoline prices rise, if oil becomes cheaper, then the cost of fuel rises. Economists have debunked the common myth that the price of gasoline depends on the price of oil. The fact is that fuel prices are more influenced by factors such as taxes, excises, and processing costs. Do not forget about inflation and rising tariffs.

Reason 1: Taxation

The main factor behind the rise in prices in the CIS countries is the new taxation policy.

Transition to a new tax system in the oil industry, which implies the introduction of a tax on additional income. It is calculated not on the entire revenue of the oil company, but on the difference between production costs and the amount of income received as a result of trading in resources - this is why gasoline is becoming more expensive in Russia.

The situation with taxation in neighboring countries is similar. Experts in the field of macroeconomics say that the main reason why petrol is becoming more expensive in Ukraine is the renewal of the tax system. So, from January 1, 2017, the state raised the rate of the base excise tax levied during customs clearance of imported oil.

Reason 2: rising oil prices

The speculative increase in the world oil price, which ranges from $30-$40 per barrel, is a significant reason why gasoline is getting more expensive. In the commodity market of the CIS countries, 85% of production is accounted for by imported oil, so traders, not having the means to accumulate reserves that can level out price fluctuations, increase the cost of production. Thus, imported oil products are steadily increasing in price by 15-20%.

Supplying goods to a foreign market is always a cost process: export duties and logistics costs affect the cost of oil products. In addition, external prices are always an order of magnitude higher than internal ones. Thus, the main reason why gasoline is becoming so expensive in Ukraine lies in the fact that diesel fuel presented on the Ukrainian market is an imported fuel.

Reason 3: Devaluation

Why is gasoline becoming more expensive in Russia and Ukraine? Mainly because the cost of gasoline is directly proportional to the exchange rate: international trading procedures take place in US dollars. Analysts say the fallthe hryvnia exchange rate by 1 point will lead to an increase in the price of gasoline by an average of 70 kopecks per liter. The situation is similar with the ruble exchange rate: its weakening leads to the loss of the domestic price in relation to the export one. To solve this problem, oilmen are taking measures to increase exports or raise domestic prices.

It is worth noting that among importers, the purchase of foreign currency occurs at a commercial rate, which is significantly higher than the interbank rate: the difference can reach 3-7 rubles / 1-2 hryvnias.

Reason 4: seasonality

Change in the cost of petroleum products in a negative direction for motorists has begun, despite the fact that the winter period is traditionally characterized by either stable or low gasoline prices in the first months of 2017.

As evidenced by the trend, the impact on the cost of fuel has seasonality. The answer to the question: "Why is gasoline more expensive?" experts find it in the increase in demand for petroleum products among transport companies and ordinary citizens. There is a pattern here: the higher the demand, the higher the cost.

Why is gasoline becoming more expensive in Crimea and Russia? The main factor influencing the constant rise in prices is the fact that the demand for fuel in Russia exceeds supply: most of the raw materials go to the foreign market, but the number of motorists continues to grow exponentially.

Reason 5: Excise administration

Imperfect system for administering new fuel excises, for example, switching to meteringproducts in liter equivalent - "throws" about 4 euros on each ton of fuel. Companies involved in the production and supply of oil face difficulties in the procedure for issuing batches of products - this directly affects the cost of gasoline, since the manufacturer includes the company's commercial risk in the price.

The cost of gasoline: what to expect in the near future

Since the beginning of the year, motorists have been steadily wondering why gasoline is getting more expensive: in the first half of 2017, one liter of gasoline cost them 3.1% more than last year. The rate of fuel price increase is so high that it exceeds the official inflation rate by 1.5 times.

Change in price tags upward, as expected, occurred during the summer period. In addition, the cost of gasoline was affected and will continue to be affected by scheduled repairs of refineries in a number of regions, although the implementation of a program to modernize production in the current economic situation seems impossible for domestic companies.

Stabilization and decline in prices for petroleum products, according to experts, are unlikely. However, it is possible that the autumn-winter period of 2017 will be the moment when the cost indicators will return to normal. In general, experts agree that the limit of the increase in gasoline prices compared to last year should be 6-7%.

On inflation in the face of rising gasoline prices

Change in price tags for food products upward is due mainly toway, by the fact that gasoline is becoming more expensive. Why is that? Retailers, when setting prices for products, include a markup of 3-4 percentage points in them, because due to the rise in fuel prices, the costs of logistics, services and goods purchased by them increase. However, the increase in fuel prices will not affect all categories of food products, since the main aspect that regulates product prices is the calculated index.

Experts suggest that the maximum rise in price will be observed at non-network gas stations, since it is difficult to control them. But in large vertically integrated oil companies, the process of making significant changes to the indicators on product price tags will be more difficult, since network filling stations are characterized by a wide range of opportunities associated with making a profit.

In any case, there is no reason to doubt that the rise in gasoline prices will "overtake" inflation: the change in fuel price categories has already been reflected in the personal inflation of every Russian. Buying expensive fuel leads to the need to save on other everyday products and look for products with more modest price points.