“The new MSO law, which was intended to enhance energy security, may instead lead to fuel shortages and strengthen monopolies. Could it become yet another trap for businesses?” The fuel market undoubtedly plays a strategic role in the country’s economy, and its operational framework requires an appropriate level of planning. However, when new market mechanisms restrict the free flow of resources, it is crucial to examine the unintended consequences of such regulations and address them.

The Association of Fuel and Energy Business, especially for the resource “Mind.ua”, shared its opinion and position on the law on MZNN. The key concerns regarding the MSO law, considering both current realities and broader implications, can be outlined in several key areas.

Security Risks

Amid Russia’s ongoing large-scale attacks on Ukraine’s critical infrastructure—specifically targeting oil and gas facilities—the law directly increases the number of potential targets for the enemy. This significantly raises the risk of fuel shortages in case of large-scale destruction, despite the fact that fuel security was the very rationale behind the MSO law’s adoption. To avoid accumulating large volumes of fuel at stationary storage facilities, many suppliers have shifted their operations towards “on-the-go” trading, reducing the risk of large stockpiles becoming targets.

Risk Insurance Gaps

The law completely overlooks the issue of risk insurance. Given the heightened probability of risks in the current wartime conditions, the feasibility of requiring businesses to create strategic reserves becomes highly questionable—especially since the market has already adapted mechanisms to mitigate these risks. Insurance companies do not provide coverage for fuel storage facilities in the event of military actions or war-related incidents.

Anti-Competitive Practices and Market Control

It is no secret which market players actively pushed for the adoption of this law. This raises serious concerns regarding violations of antitrust laws, as it directly affects free market competition and should be investigated by the Antimonopoly Committee of Ukraine (AMCU).

Owners of fuel storage facilities stand to benefit the most, as many small traders will be unable to import fuel due to the new restrictions—directly limiting resource supplies to the market. However, it is precisely these smaller traders who drive innovation, optimize logistics and supply chains, and introduce cost-saving measures that benefit the entire market. Naturally, such ingenuity does not align with the interests of industry lobbyists.

Resource Decentralization and Market Fluidity

Market shortages occur whenever external factors disrupt supply chains. The law’s direct restrictions on customs clearance for fuel imports will likely follow a predictable pattern: first, a supply shortage, followed by temporary stabilization, and ultimately a significant increase in fuel prices due to:

a) The ability of certain importers to maintain high profit margins.
b) The inclusion of additional costs resulting from compliance with the law in the final fuel price.

The Rise of an Oligopoly

Even if a trader wishes to create fuel reserves but lacks its own storage facilities, the decision to provide (or deny) access to storage remains in the hands of companies that do own such facilities—effectively their competitors. This situation directly promotes the formation of an oligopoly with long-term negative consequences. Similar market distortions have been observed in other industries.

Limited Storage Infrastructure

Fuel market players have repeatedly raised concerns about the insufficient storage capacity available to meet the requirements of the MSO law. Even in the short term, Ukraine lacks enough storage infrastructure to create a strategic fuel reserve.

Frozen Resources and Cash Flow Issues

The creation of reserves means that fuel is effectively “frozen” alongside the financial resources used to purchase it. This slows down both future fuel imports by market participants and the market’s overall liquidity. Recent events have proven that blindly following directives from other countries without conducting thorough domestic analyses can be a costly mistake—especially in Ukraine’s current crisis. When such regulations are manipulated for corporate interests, the result is a dead-end scenario.

The Position of the Fuel and Energy Business Association

The Fuel and Energy Business Association (FEBA), together with journalist and trading expert Mykhailo Shuban, has examined the impact of the MSO law on the market.

The association closely monitored developments leading up to the law’s enactment. Until the last moment, there was hope that the government would delay its implementation. FEBA provided independent analysis of the law’s key provisions, followed updates from the Ministry of Energy, and reviewed reports from working meetings held in December 2024 involving major fuel market players, Ukraine’s State Customs Service, the State Tax Service, expert organizations, industry associations, and regulatory bodies.

The government’s rushed approval of key regulations—such as those governing the creation, management, and operation of the MSO system, fuel quality and safety monitoring, fuel market volume monitoring, and the electronic reporting system—did not inspire confidence that the law would function effectively from December 24, 2024.

That said, the government ultimately made concessions to businesses by postponing certain requirements until the end of martial law and for an additional six months afterward. However, questions remain about the necessity and timing of launching the MSO program in Ukraine.

The implementation of the MSO system, mandatory advance payments for fuel stations, and increased excise tax rates on fuel have reinforced a widespread belief among small and medium-sized businesses in the fuel sector: under the guise of improvements and EU compliance, laws are being pushed that serve only to monopolize Ukraine’s fuel market in favor of large industry players.