The Ukrainian government has decided not to reduce value-added tax (VAT) or excise duties on fuel, despite rising prices. Minister of Economy Yulia Svyrydenko stated that these taxes are crucial for funding the military budget.
Instead of tax reductions, the government plans to implement a cashback program and leverage state-owned company Ukrnafta to stabilize fuel prices. Ukrnafta will sell fuel with minimal markup, aiming to establish a benchmark for fair pricing in the market.
The cashback initiative will provide financial relief to consumers affected by the price hikes, offering:
- 15% cashback on diesel
- 10% cashback on gasoline
- 5% cashback on autogas
This program is set to run until May 1, 2026, at participating gas stations.
Energy Minister Denys Shmyhal addressed the underlying causes of the current fuel crisis, attributing it to the ongoing conflict in Iran, which has impacted global fuel supplies. He noted that Ukraine relies on imports for over 85% of its fuel needs, making the country vulnerable to international market fluctuations.
Despite the challenges, Shmyhal assured that there is currently no fuel shortage. In March alone, Ukraine imported nearly 250,000 tons of gasoline, diesel, and liquefied gas, maintaining reserves of about 100,000 tons of each type. The country sources fuel from over ten nations, with Poland, Lithuania, Romania, and Greece being the primary suppliers.
The instability in the Middle East has led to significant volatility in the global energy market. While oil prices peaked at $120 per barrel, they have recently decreased to around $100. However, these prices remain approximately 20% higher than pre-crisis levels.
The Ukrainian government has opted not to reduce fuel taxes, instead introducing a cashback program to help consumers cope with rising prices. The ongoing fuel crisis is linked to international conflicts, particularly in Iran, affecting global supply chains.