OKKO had fuel reserves for 6–8 days at start of war in Iran, as did entire market – CEO
The constant threat of strikes on fuel storage facilities makes it impossible to accumulate reserves in Ukraine, meaning that fluctuations in global petroleum product prices immediately affect pricing in the country, said Vasyl Danyliak, CEO of OKKO Group, one of the largest players in the market.
"The reserves we have are extremely small. Other operators have similar stocks: at the start of this war we had diesel fuel reserves for about six days and gasoline for slightly more – around eight days," he said in an interview on the Ukraine Economic Outlook channel.
"Accordingly, any fluctuation in the market instantly affects pricing in Ukraine. It immediately impacts pricing in small wholesale trade, where fuel is sold by tanker trucks, and with a slight lag, but still essentially immediately, it affects pricing at filling stations," Danyliak said.
He explained that fuel station tanks are filled to about 60–65%, with some additional reserves in storage, though a significant portion has already been sold in advance under business contracts, including to the Armed Forces.
The OKKO CEO said that in the European Union, where minimum stock requirements are in place, though suspended in Ukraine during wartime, fuel market operators also adjust prices almost instantly due to commercial logic, and price increases in Europe have been even steeper than in Ukraine.
"We understand that any overly aggressive price increase would have an extremely negative impact on consumption. Therefore, we chose a strategy of gradual price increases rather than a ‘cold shower,’ where prices would need to be raised by UAH 5–7 in a single day," Danyliak said, describing the company’s approach.
He added that, given the critical importance of diesel fuel for the economy and inflation, OKKO raised diesel prices less aggressively than gasoline prices to act more socially responsibly.
According to him, as of March 14, diesel quotations in Europe had risen by $460 since the start of hostilities in the Persian Gulf, reaching $1,222 per tonne, while gasoline increased by $308 to $1,450 per tonne. In addition, trader premiums rose from $5 to $40–50 per tonne, while hryvnia depreciation added another UAH 1 per liter, he noted.
Based on his calculations, factoring in all these elements would imply a price increase at filling stations of UAH 21 per liter for diesel and UAH 12 for gasoline—to UAH 87 and UAH 77 per liter, respectively, whereas the company raised prices by UAH 14 and UAH 5, respectively.
"In other words, we fell short of a UAH 7 increase. We understand that for company economics to remain healthy and to prevent shortages in the country, prices will need to rise by a few more hryvnias in the coming days," Danyliak explained.
He stressed that non-market pricing would trigger a cascading "drying out" of fuel station networks.
According to the OKKO CEO, after an initial surge in demand during the first three days, it gradually declined, although there was a second spike.
Regarding the pricing behavior of state-owned Ukrnafta, which keeps prices about UAH 6 per liter lower than major networks (compared to a pre-war difference of UAH 2–3), Danyliak said this could attract customers in the short term.
"Everyone has their own approach. For some, this may be an opportunity to attract customers and then retain them. It is a policy choice. Unfortunately, it is a very expensive policy. We, for example, cannot afford it," he said.
Summing up, he stressed that price changes in the market are objective, as the Ukrainian market is the most competitive in Europe.
"Believe me, none of our competitors will allow OKKO to earn more, and OKKO will not allow WOG, Socar, or Ukrnafta to earn more, and Ukrnafta will not allow all of us combined to earn more. During the full-scale invasion of 2022, our consumers saw that Ukrainian business is capable of coping with any challenges. The main challenge in our market is shortages, as their presence can trigger price tsunamis," Danyliak said.
He added that the company is generally interested in lower fuel prices, as this reduces the need for working capital and boosts consumer demand.
As for potential government support, the OKKO CEO said he does not believe in the possibility of abolishing excise taxes.
According to him, the company proposes creating an insurance fund that would compensate market participants for wartime risks associated with maintaining minimum reserves. This would require collecting statistics on losses of fuel stocks and funds destroyed by Russian strikes, averaging them annually, and comparing them with the roughly 10 million tonnes of fuel sold on the Ukrainian market each year. The resulting figure could be added to the excise tax and earmarked specifically for building a strategic insurance reserve.
