For 20 years, Ukraine has failed to create a system that can safeguard the rights of fuel consumers
It’s been three years since the Ukrainian government stopped showing interest in what quality of fuel is pumped by almost nine million Ukrainian drivers into the tanks of their «iron horses.» Laboratory quality checks on petrol and diesel ceased, and the companies producing and selling alcohol and petrochemical substitutes were effectively given a green light.
Will Ukraine ever have an effective system to protect the rights of consumers, as the president demands? What has to be done to resolve the complex problem of the quality of fuel?
One has to admit that in 2009-2011 the Ukrainian fuel market saw:
- a widening gap between the technological level of cars and the quality standards of petroleum products;
- an outdated regulatory framework that is conducive to maintaining a large share of low-quality fuel, which harms the environment and vehicles;
- high prices, a lack of government checks on quality, and the poor development of public institutions of control, which encourages economic entities to manufacture, import and sell fuel substitutes;
- unfair competition, which contributed to receiving additional capital, which was funneled into lobbying for the interests of businesses engaged in the production and sale of low-quality fuel.
Today Ukraine sells 250,000-300,000 tonnes of gasoline components (excluding methyl ester and ethanol fuel) every month. Up to one million tonnes of consumed petroleum products are made of petrochemical raw materials, gas condensate, stable natural gasoline that can be processed into high-quality fuel only at enterprises that have modern technologies.
In the summer of 2011, about a third of Ukrainian filling stations sold high-octane fuel at prices lower than the calculated wholesale ones, which indicated unfair competition at the expense of quality. By winter, the number of filling stations offering fuel at lower prices declined. Those who sold poor-quality fuel at high-quality prices not afraid of checks and did not rush to sell their «hot resource.»
The authorities are constantly saying they wish to ensure the «stable functioning of the market,» but what they mean is that they want to ensure the availability of a sufficient amount of fuel at a low price. By reining in the price artificially, the state does not allow traders to respond to objective processes, leaving only two ways to keep their business running – either going beyond the «recommended price limits» set by the group of sectorial experts and analysts, or «optimizing» the quality of fuel.
Using the first way, the owners of the retail chains have brought «premium» fuel onto the market, which are not mentioned in the bulletins of the expert and analyst group, which allows them to earn 5-10% more due to the ‘quality’ mark-up. In 2011 about half of the Ukrainian filling stations offered 11 brands of petrol marketed as A-95 Euro. But the fall in real incomes due to the economic crisis has considerably lowered demand for such premium products, which grew in price by more than a quarter in the first half of last year alone. In January-June 2011 sales declined by 11%, while sales of A-92 petrol increased by 8%, causing shortages of the product (in June 2011 A-92 was sold at a higher price than the imported analog of A-95 Euro).
You can read full article in journal «Terminal: Oil Review» №8 (594) 27 Feb 2012
