Since the beginning of the full-scale war, fuel prices in Ukraine have risen significantly. Companies had to change suppliers, build new logistics lines, and cope with fuel shortages and high customer demand.
Experts in the fuel market summarized the year for the sector and informed the Mind of the difficulties facing market participants as the full-scale invasion took place. Also, how the embargo on Russian oil products can change the Ukrainian and European markets, whether the shortage of fuel may repeat itself, and what fuel prices to expect in 2023.
The beginning of the war and solutions to the main problems of the industry
Prior to the full-scale invasion of the aggressor, Ukraine mostly imported oil products from belarus, the russian federation, the Republic of Lithuania, and Romania by rail. Additionally, some products were supplied by sea from different countries. However, on February 24, 2022, everything changed. The road, which provided only 3% of imports before the invasion, was the only remaining route. In the last 50 years, no country in Europe has faced such a challenge – to completely rebuild logistics in a few weeks. There were no alternatives to supply fuel, but only by road.
Most carriers were not only technically not ready for foreign trips, but they were also trying to overcome a whole series of organizational problems. This includes obtaining a deferment from the mobilization (booking) of drivers, and the issuance of foreign passports for drivers and international licenses for transport companies, customs certificates, technical certificates for technological transport, and many other details, which in the conditions of martial law seemed impossible to implement in a fairly short period.
The lack of direct contracts for the supply of fuel from nations that weren't Ukraine's primary oil suppliers before the conflict was another significant obstacle to the fuel market. Large gas station chains thus started actively looking for chances to secure contracts with suppliers from other EU nations and to negotiate with foreign carriers. Ukrainian carriers started seeking technological transportation at the same time throughout all of Europe.
"Most of these issues were resolved literally in a matter of weeks with the support of the Ukrainian government. The government created conditions for prompt importation of fuel from abroad: prioritized entry of motor vehicles with petroleum products into Ukraine, extraordinary customs clearance of fuel at the borders, introduced insurance for railway and tank trucks, as well as vessels from other countries that transport fuel. In addition, the excise tax on petroleum products was abolished, and VAT was reduced from 20% to 7%. And most importantly, the regulation of retail fuel prices was canceled, which allowed operators of retail chains to increase stocks of petroleum products. The joint efforts of the government and oil traders gave a significant result," said Audrius Stropus, CEO of AMIC Ukraine.
The Ministry of Infrastructure held online meetings “FUEL/AUTO LOGISTICS” aimed at helping both carriers and suppliers of fuel to resolve their urgent issues. All participants were able to ask questions and quickly get responses from staff members of the ministry using a separate chat that was set up for the process.
Simultaneously, railway supply chains were being built. This delivery type had its technological challenges. For instance, the railway track between Poland and Ukraine, like many EU countries, has a difference (EU - 1435 mm, Ukraine - 1520 mm). This is the main factor that affects the time of fuel delivery to Ukraine and, as a result, the speed of turnover of railway tanks, which further affects the offer of free tank cars on the market of this type of transport. Instead, the creation of oil product transshipment points from tank cars to motor vehicles allowed the optimization of this process.
Link to the full article on Mind
