“European-style” price tags or constant price pressure: what Ukrainian drivers can expect in the next 3–4 years
28 August 20:23
FORECAST
Rumors of “astronomical” gas prices and chaos at gas stations did not come true, and the global oil market quickly stabilized after yet another flare-up in the Middle East. However, Ukrainian drivers cannot breathe a sigh of relief just yet. While global prices are falling, Ukraine operates under its own, far stricter set of rules—ranging from daily enemy attacks on fuel infrastructure to currency fluctuations and disputes over taxes.
Are we facing another price spike at gas stations, how is the government trying to rein in the appetites of private chains, and why is the era of expensive oil set to end as early as 2030? We explore these questions with experts in this "Komersant Ukrainian" article.
When analyzing the causes of the current rise in fuel prices, several key factors can be identified, among which the global and local security situation plays a primary role. Ivan Us, Ph.D. in Economics and chief consultant at the Center for Foreign Policy Studies of the National Institute for Strategic Studies, noted this in a comment to “Kommersant Ukrainian.”
“Geopolitics is certainly driving the price increases. That is, the escalation in the Middle East. This is Russia’s war against Ukraine. Well, listen, we already have… I think more than 100 gas stations in Ukraine have been destroyed by the Russians since the start of the full-scale war. And, unfortunately, that number is growing almost every day. So it’s clear that this is also having an impact,” Us notes.
In addition to the direct destruction of fuel storage infrastructure, domestic economic and regulatory processes are putting pressure on prices at gas stations . In particular, this refers to exchange rate fluctuations, as the devaluation of the national currency directly increases the cost of imported petroleum products. According to the expert, another factor is government regulation.
Could fuel prices go down?
Despite these negative factors, there are tools and conditions in the market capable of halting or even reversing the price trend. The first such lever is the active involvement of the public sector to curb the appetites of private retailers.
Ivan Us emphasizes that the state-owned operator acts as a market safety valve, since every player understands that if the state-owned operator offers fuel at a significantly lower price, consumers will simply go to it. To avoid losing market share, private chains have to keep their profit margins in check.
A second major factor driving prices down is the potential de-escalation on the international stage. While tensions in the Middle East push prices up, a reduction in tensions immediately drives prices back down.
“A potential de-escalation in the Middle East will lead to a price drop. We’ve actually seen this happen. In the spring, global prices were around $110 per barrel of Brent crude on three-month futures contracts. Now the price is not only below $90, but tensions have flared up again… We can see that the price isn’t that high,” Us points out.
He recalls how, during the crisis near the Bab el-Mandeb Strait, market forecasters predicted catastrophic prices of $150 or even $250 per barrel. However, in reality, oil prices stabilized around $90 and very quickly fell back to the $70–80 per barrel range. This demonstrates the market’s high flexibility and the lack of long-term grounds for a global rise in the price of “black gold.”
Among additional domestic factors that could positively impact fuel prices for Ukrainians, Ivan Us cites the de-shadowing of the market and the development of healthy competition.
What is the forecast for the next 3–4 years, and should we expect prices “like in Europe”?
Speaking about the medium-term outlook through 2030, the expert offers a moderately optimistic forecast. In his view, there are no preconditions for a panic-driven price spike in the long term, thanks to global shifts in consumption patterns.
“Prices should go down by 2030. Back in 2018–2019, a forecast was made regarding global oil consumption for 2030, and they specifically stated that by 2030, a so-called ‘plateau’ would be reached—there would be no increase in consumption because alternatives are available. And this will certainly curb the rise in global oil prices,” explains the candidate of economic sciences.
According to the analyst, the situation will develop in such a way that demand will become relatively stable, while supply from market players will grow. And the balance between stable demand and increased supply, according to economic principles, will inevitably push prices downward.
Of course, natural inflationary processes will continue, and prices may experience short-term fluctuations. However, there is no reason to expect a “fantastic” rise in the cost of oil and fuel in the coming years—the market has already proven its ability to recover quickly even after the most severe geopolitical shocks.
