Fuel spring
The collapse of administrative market regulation and the flight to the other extreme, the ultraliberal one – the elimination of customs barriers on the path of imports into Ukraine – is as temporary a solution as the previous price restriction. And no less painful. The adoption of the law that clears the way for gasoline from neighboring countries will not solve all problems.
"Russia has shut off Ukraine's oil tap" – such rhetoric can be heard from the prime minister when justifying the need for a "green light" for imports. However, what happened was something that in a certain sense could not have been avoided. As soon as Ukrainians try to have real political and economic independence from Russia, problems in the energy sector are guaranteed for them.
The domestic economy is almost one hundred percent dependent on Russian oilmen – from well owners, managers of oil refineries, and finally, from the gas station attendants who put the nozzle into a car's tank. And it is no wonder that when the government tries to impose its opinion on the above-named categories, it encounters a rather powerful and aggressive response.
The ambitious leadership of the Cabinet of Ministers has finally found itself a worthy opponent. In response to the combination of swaggering PR statements by the country's top officials and primitive administrative means applied by officials, the oil companies responded adequately.
Their task was to show that the ceiling prices set by the Ministry of Economy violate the objective laws of the market and will lead to a shortage. At the same time, everything needed to be done so that it resembled deliberate sabotage of the Cabinet's decisions as little as possible.
To this end, over the course of several weeks they simulated the slow, gradual emergence of a shortage on the market. Gasoline exists, but it is difficult to buy – it is dispensed only by cashless payment. This primarily creates inconveniences for so-called "ordinary" drivers.
Maximum political effect at minimum economic cost. Such flashy means of whipping up panic as "no more than 10 liters per person" and the like were also brought into play. Besieged Leningrad, and that's it.
(However, with all the demonstrative character of all these demarches, in a certain sense the oil generals have a moral right to such behavior. More precisely, the government gave them such a right by calling them guilty of a monopoly conspiracy but not presenting weighty evidence of their guilt.)
Parliament on Tuesday abolished import duties on gasoline. Despite the radical legislative steps, the crisis will continue to grow in the near future. Imported gasoline in quantities of tens and hundreds of thousands of tons will not appear in the country in a flash.
The hype on the market is a good argument in the hands of the oil companies, since it is already an objective phenomenon, although caused by artificial means. The effect is there, the government lost one round and started another. However, everyone lost. Society lost too, and this situation will also negatively affect the profits of the oil companies.
Better now
However, the situation is not so bad. The main thing is that the conflict has gone so far that it can no longer be resolved with temporary agreements and other half-measures. The ineffectiveness of such a half-measure as artificial price restraint has shown: oil dependence on Russia is a disease, and one must suffer through it to the end in order to recover once and for all. The same thesis will soon be proven by "cheap" imported fuel, which on the whole will be expensive for the economy.
However, Ukraine is lucky: its economic immunity is now stronger than usual. The present moment is extremely well suited for a small gasoline crisis. It is precisely at this time that the economy is able to endure it relatively painlessly. And the state, which must react, has every opportunity to react most effectively.
The end of spring is the period when mass deliveries of diesel fuel to farmers have already ended. At the same time, the summer peak of demand for gasoline for travel has not yet arrived. Thus, for buyers – both private individuals and industrial consumers – a mild gasoline shortage will not become a catastrophe.
The government needs to be mentioned separately. On the one hand, the Cabinet members have not yet been so worn down by routine that the duties of power in the best sense of the word have become repugnant to them. On the other hand, the revolutionary-feverish ardor has already subsided somewhat. The experience of settling the oil crisis has shown that real problems cannot be coped with by virtual (that is, administrative) methods alone. Finally, the authorities have a certain credit of political trust, which gives the government legitimacy to carry out almost epochal steps.
One would like to hope that it has finally dawned on the Cabinet of Ministers – on the oil market there is such a tangle of problems that it is impossible to solve them by administrative restraint of the "price ceiling" alone. It is only possible to make things worse.
After all, gasoline is expensive not only because oil costs more and more. But because from a liter of this oil in Ukraine, at best, only half a liter of gasoline is made, and everything else is sold for a pittance as mazut.
For comparison, the depth of oil refining at "normal" refineries in developed countries reaches over 85%. Then it is no wonder that in the USA, where the costs of oil delivery and labor are higher, gasoline costs less. And at the same time it is of higher quality than in Ukraine, which is extremely close to Russian oil pipes.
Let us assume that under the hothouse conditions of previous governments, monopolism on the fuel market flourished and oilmen "raked in" superprofits. Then now, when their profitability is being restricted – would they have a great desire to invest in increasing the depth of oil refining?
Hardly. At a minimum, out of principle, the oil companies will not go for investments. After all, their position is to demonstrate the intolerability of the conditions proposed by the government.
Psychic attack
Judging by the government's latest statements, the authorities intend to fight the Russian oil monopoly at all levels – oil sources, refining, and sales. Ukraine should receive oil from the Caspian region, refine it at Ukrainian refineries (possibly newly built), and sell it through a network of gas stations built or acquired in accordance with the government's program.
If all this is true, then the "oil Russians" will have a hard time. No, it will not be a question of price – oil from Kazakhstan or Azerbaijan will not be cheaper, no matter what officials say. However, if an oil refinery with modern equipment is indeed built, then in addition to the lower cost of its products, it will produce higher-quality fuel. Which, under 2 conditions – sufficient capacity of the refinery, as well as a sufficient number of filling stations for selling petroleum products – will make it possible to practically instantly push aside the low-quality gasoline from other Ukrainian refineries owned by Russian capital.
However, this scenario has risks, besides the banal lack of money for such a project (theoretically, a company as large as Naftogaz of Ukraine could handle this).
First, there is possible lobbying on the part of oil corporations – this time those that own oil deposits in the Caspian. After all, it is possible that this project will turn from a national one into a purely commercial one.
For example, it may happen that the refinery will be owned or controlled by yet another transnational corporation. Which in the end will bring Ukraine yet another dependence – this time not on "Russian" but on "Caspian" [oil].
Second, there is a political risk. After all, the construction of oil capacities is a matter of more than one year and many hundreds of millions of dollars. And when political priorities change, there is a very great temptation to abandon such an investment of state money.
Finally, there is another risk, the most powerful one. This is the price of Caspian oil. "Black gold" from Kazakhstan and Azerbaijan already has its planned routes to the consumer. Therefore, in order for Ukraine to buy off part of these flows for itself, it needs either to negotiate additional production or to pay a higher price. In any case, Kazakh oil will not be cheaper for Ukrainians than Russian oil.
However, even with such significant risks, one should worry about the main thing – that all these rational plans do not turn out to be just another psychic attack on the Russian oil business.
Ihor Lutsenko, economist