As of Jan. 1, 2011, the Ukrainian oil refineries will have to enforce Euro 4 and 5 emission standards. Meanwhile, the MASMA Ukrainian research institute, which covers the oil-refining sector, says that refineries won’t be equipped to do so until 2012.
NGOs and oil market experts are opposed to postponing the date of the switch to tougher quality standards. They are urging the Ministry of Fuel and Energy (Minpalyvenerho) of Ukraine to keep the originally-adopted, better-quality schedule, while canceling the tax on imported oil products designed to protect Ukrainian producers.
“Levying this import tax while keeping old quality standards will further increase the amount of inferior and faulty products on the market, while the prices will be up in direct proportion to the amount of the tax,” Andrii Pasichnyk, president of the Oil Product Consumer Rights Protection Committee, recently told the roundtable “What Kind of Air will Ukrainians Breathe in 2011, or What Oil Product Quality Ukrainians Need.”
Considering the 60-100-euro-per-ton import tax being discussed by the Minpalyvenerho, he estimates that the market price of a liter of gasoline will be up by 0.6-1.20 hryvnias, with its quality going down. Pasichnyk believes that under these circumstances the government should resume quality inspections of oil products, expand the NGOs’ authority in protecting consumer rights, and help upgrade domestic oil refineries instead of increasing oil taxes.
Tamara Malkova, head of the Charity Information Center Green Dossier, notes that the main risk of maintaining old quality standards is improving Ukraine’s status as a destination for the disposal and supplies of nonliquid products. “While quality standards are being upgraded everywhere, Ukraine stays out. Disposal of defective products is very expensive abroad, so our country looks very attractive as a waste disposal facility,” declared Malkova, stressing that this process is already underway for a number of commodities. She is convinced that Ukraine’s “environmental policy must take into account the views and interests of various agencies and social strata, but always provide for tougher ecological standards or at least their harmonization with the neighboring countries’ advanced standards. In our case it is the European Union.”
The import tax and authorization to supply fuel under obsolete quality standards will not secure a better work load for the Ukrainian refineries, contrary to Minpalyvenerho’s assurances, insists Serhii Kuiun, director of A-95 Consulting Group: “The Lysychansk oil refinery is working at full capacity whereas Odesa’s workload is minimal; the Shebelin gas refinery has no crude, and the West Ukrainian oil refineries are so obsolete, they can’t even meet Euro 2 standards.” Kuiun points out that this tax will be a heavy blow to all market operators and consumers, since a sharp increase in prices for oil products will reduce consumption, which is already low because of the crisis.
Experts are sure that under the circumstances the state should introduce a floating gasoline and diesel fuel taxation scale (using the better-quality-lower-tax principle), resume quality control in the sales network, and enact legislation allowing the refineries to optimize production upgrading expenses.
