Two approaches to market-oriented pricing
On December 12, 2006, right after the meeting of an industrial group of experts and analysts under the then vice premier for energy issues Andriy Kliuyev, pro-government reporters were in rapture over the «first step to the transfer to international standards of price formation» — the creation of a formula that would determine the price of fuel at Ukrainian filling stations. While «price formation standards» do not exist in developed countries (competition, cherished by these countries’ governments, is the rule there), methods to determine «economically justified» retail prices of motor fuel, which have never been published and have never been analyzed, have been in use in Ukraine for five years. And what are the methods, and how good is the approach applied by the past three governments?
If one adheres to the principles of a market-oriented economy, pricing on the fuel market of any country should ensure the following:
a) the stable, smooth and cost-effective satisfaction of domestic demand through the creation and development of a market with a high level of competition and fair principles of trade;
b) the formation of an effective and stable pricing system on the fuel market, interrelated with measures to facilitate competition, and boost energy efficiency and energy saving;
c) the development of its own oil refining industry aimed at increasing the depth of processing of crude oil and improving the quality of oil products;
d) the development of a market monitoring system;
d) encouraging the development of independent agencies in production, storage, wholesale and retail sale of fuel;
e) the development of fuel trade on exchanges.
What is meant by market-based petrol pricing in our country?
You can read full article in journal «Terminal: Oil Review» №18 (604) 7 May 2012
