The Ukrainian fuel market is in a difficult situation, completely dependent on external factors and the volatility of global prices. Experts warn: the high cost of oil products, on which farmers have already carried out sowing, could become a catalyst for rising prices of basic food products in the coming months.

Alexander Sirenko, Director of the consulting company "NeftRynok", told RBC-Ukraine about the reasons for the current situation and gave a forecast for the second half of the year.

Why diesel is getting more expensive faster than gasoline

The dynamics of prices for different types of fuel are not uniform. According to the expert, this is due to the geopolitical situation, in particular the so-called "Iranian crisis", and the structure of demand in various regions.

"When oil became more expensive, gasoline showed a slower growth rate than diesel and aviation kerosene. In Europe, the issue of diesel supply is more acute, as diesel vehicles prevail there, unlike in the USA," Sirenko explained.

On the domestic market, the company "Ukrnafta", which is an indicative network, played a certain restraining effect in the past, especially after the government defined its role. However, in May the situation changed: diesel prices fell, while gasoline became more expensive due to changes in global prices and the structure of supplies.

Record prices and lack of protection

Assessing the sustainability of the Ukrainian market, Sirenko emphasized its complete dependence on external factors. "That's where the good news ended, and we move on to reality. The Ukrainian fuel market is not protected from external factors such as prices," the expert noted.

The global market rose against the backdrop of risks surrounding oil supplies from the Strait of Hormuz region. The exchange price was fixed at $119.5 per barrel, although the raw material reached consumers by other routes and not in full volume.

Ukraine does not produce enough oil to influence global indices, but is forced to pay for these risks. If at the end of February a ton of diesel cost $750, at the peak values reached almost $1,000–3,000 per ton.

"Add our taxes to this figure — these are excises, VAT, and, I remind you, in April there was a peak of 90 hryvnias per liter of diesel. These are record values for the entire history of Ukraine. That is, we have no influence, and we are not protected from these prices in any way," Sirenko said.

Inflation threat and rising food prices

The current economic situation directly threatens an increase in inflation. Despite fluctuations, global oil prices remain at around $90 per barrel, which is significantly higher than the February $60, and the conflict in the Middle East has not ended.

Due to the high cost of fuel, the Ukrainian agricultural sector conducted the sowing campaign at historically highest prices. The harvest will also be taken in conditions of high diesel prices.

According to the expert's forecast, this will inevitably lead to an increase in the price of basic food products on store shelves in late summer and autumn.

"I'm getting to the point that we, it seems, will harvest the same with expensive diesel. And, guess what will become more expensive in us in August, in September, in October? I don't know in which month. But it will be sugar, buckwheat and all those products that we see in stores," Sirenko suggested.

What awaits Ukrainians

The expert concluded that Ukrainians need to be prepared for difficulties, as the war has not ended either in the Middle East or within the country. "Therefore, inflation and other such unpleasant things in the economy of Ukraine await us," Sirenko summarized.