Diesel & Gasoline Prices Capped Until May

Until May 1, the Economic Ministry has set the following caps on wholesale prices for diesel fuel and gasoline sold on the domestic market:

Diesel fuel: USD 558.5 per mt

?-95 gasoline: USD 672 per mt

?-92 gasoline: USD 663.0 per mt

?-76(80) gasoline: 658.1 per mt.

Recommended retail trade mark-up is set at 13%.

Concorde Capital: The new price caps are much more meaningful than the government?s previous measures. Earlier, the government took a very confusing step by limiting ?the profitability? of refineries by 15% and setting a ?maximum retail markup? of 15%. It is now clear that the burden of increased crude prices will be almost entirely borne by refineries. Conversely, retailers will be able to retain almost all their markup  (which is currently 13-14% ), and even benefit from the price hikes by reaping higher absolute profits. The only concern for retailers may be differences in the government?s methodology of for calculating trade mark-ups and their own. While the government?s measures are positive for Galnaftogaz (GLNG: BUY) and Ukrnafta (UNAF: BUY), we would caution that this is not where the story ends, as refineries may take retaliatory measures, such as deliberate stoppages.