Autogas rises significantly in price: what are the reasons and what will happen next
30 December 14:14
Prices for autogas in Ukraine have been on the rise in recent weeks. However, we should not expect a sharp and uncontrolled rise in the price of this fuel, as it has a clear economic limit to its profitability. This was stated by Leonid Kosyanchuk, an expert on the Ukrainian oil products market, in a commentary to "Komersant Ukrainian".
Excise taxes from January 1
One of the key factors putting pressure on the fuel market is the increase in excise taxes starting January 1. According to the expert, the excise taxes are growing quite significantly:
- on gasoline – by 29 euros per thousand liters;
- for diesel fuel – by 38 euros per thousand liters;
- lPG – by 25 euros per thousand liters.
This decision creates the preconditions for a price increase:
- gasoline – up to about UAH 2 per liter;
- diesel fuel – up to UAH 2.5-3 per liter;
- autogas – to about UAH 1.5 per liter.
At the same time, Kosyanchuk said, some companies could have raised prices in advance – it was a matter of each network’s marketing policy, not a mandatory trend for the entire market.
Why autogas has risen in price now
The expert names several reasons for the current rise in autogas prices.
First, it is the supply and demand ratio. The market has been experiencing gas supply disruptions, in particular because a significant portion of liquefied natural gas used to be of Russian origin, and the ability to purchase it was deliberately limited. Logistical problems and infrastructure damage also had an additional impact.
“The first is the supply-demand ratio. And if there were gas failures somewhere, and you remember that we had problems with gas there because it was of Russian origin and we limited ourselves to the places of its purchase and so on. Plus, the fact that the bridge was broken, we didn’t have time…,” the expert explained.
Secondly, the seasonal factor. In winter, autogas behaves worse due to lower temperatures, which traditionally affects its consumption.
Thirdly, changes in consumer behavior. Despite the overall decrease in fuel consumption, some drivers are switching to autogas due to high prices for gasoline and diesel.
LPG has an economic limit
Leonid Kosyanchuk emphasizes that autogas has a clear economic limit, above which it simply loses its meaning for consumers.
If the cost of liquefied gas exceeds 60% of the cost of gasoline, it will be economically unprofitable to refuel with it.
In this case, drivers will simply return to gasoline, which currently has no problems with availability. That is why, according to the expert, autogas cannot rise in price indefinitely – the market will automatically adjust the price.
Why gas cannot be purchased in advance
Unlike gasoline and diesel fuel, LPG is very difficult and expensive to store. It is impossible to import it en masse before the excise tax increase and keep it in stock for several weeks.
Gas can only be stored in specialized gas terminals, and the process is dangerous, especially given the security situation in the country. This has also become one of the reasons for its rise in price.
Kosyanchuk notes that autogas is not already a highly profitable segment, unlike gasoline and diesel, where the difference between the wholesale and retail price today is 8 hryvnias or more.
“And it’s not like gasoline, you can’t just store it, it can only be stored in specialized gas terminals. That’s why it went up in price, among other things. It was not very profitable anyway. On the contrary, diesel fuel and gasoline are the most profitable today, with a difference of 8 hryvnias or more between the wholesale and retail segments, you know,” the expert said.
Should we expect a new price hike on January 1?
The expert does not expect a sharp rise in prices right after the New Year. The reason is the dead seasonal consumption period.
January and almost all of February are traditionally times of minimal demand, when some market operators break even or even make a loss.
“That is, there is no need to worry about LPG, because if, for example, gasoline is an alternative to LPG, LPG is an alternative to gasoline, and there is no alternative to diesel, unfortunately, that’s the way it is,” Kosyanchuk summarized.
