Fuel Price Regulation: Do We Pay Less?

Medunytsya Oleg

Expert on budget and decentralization. Member of the Verkhovna Rada Committee on Budget of the 7th-8th convocations. He participated in the development and implementation of budget reform, administrative-territorial reform and…


21 May 2021

The government has recently signed a memorandum with leading fuel networks. The country has been solemnly announced that fuel prices will not rise. In return, oil traders complained to the authorities about a large number of counterfeits in the fuel market. In order to allegedly fight against counterfeiting, meetings were held, including with the participation of the President himself.

The President promised to actively fight against the illegal market.

‘We are ready to help. If you have data on the regions - give it to us. We will deal with illegal immigrants… I promise you that from January, after the holidays, we will start combating all illegal immigrants very hard,’ Zelensky promised.

And the state machine began moving fast. Regional networks that traded in legal fuel in good faith, but were not part of the cartel of large oil traders with whom Zelensky negotiated, will also fall under the rink against illegal immigrants. Security forces, tax authorities, and local state administrations have launched numerous inspections. Most of them ended traditionally - the enrichment of the inspectors themselves, but some retail chains did close.

The Cabinet of Ministers introduced state regulation of fuel prices for the period of quarantine and recognized it as a socially significant commodity. The growth of fuel prices stopped in the range of UAH 30.

All conscious economists have criticized this apparently non-market way of regulating prices. Instead, Zelensky’s entourage undertook to justify this campaign. The greatest surprise came from Tymofii Mylovanov, the former Minister of Economy under Zelensky, who called the regulation of fuel prices justified.

And now what really happened. Oil traders and large fuel retail chains, with the help of Zelensky’s government, cleared the market for them and, of course, began to earn more. The appetite comes while eating. And fuel traders have come up with an original way to formally implement the memorandum with Zelensky and increase their profits in a market cleared of competitors. The fact is that most of oil traders’ networks make their sales through discount cards. For most customers, such a discount was a maximum of up to UAH 5 per liter of gasoline and diesel. Already, such discounts have been reduced to miserable 50 kopecks per liter.

Formally, Zelensky’s promise is being fulfilled. Price lists at gas stations are within UAH 30, but in reality consumers pay more now. Large networks seem to be fulfilling a memorandum with the authorities, but in fact receive additional profits due to such machinations and cleansing of the market from competitors by the authorities. And how does Zelensky’s government react to this? In no way! Passed! We move further in the green turbo mode.