Today, the government is opting for a support model based on fuel cashback. At first glance, this looks like care for the consumer. But if we look deeper, it is not about lowering prices—it is about compensating for the consequences.
And here lies the key question: Are we treating the root cause, or are we merely masking the symptoms?
Global practice during fuel crises is quite clear: states work with the price structure—taxes, regulation, and competition. In Ukraine, however, a different path has been chosen: stimulating demand through cashback, which:
- Does not lower the base price of fuel;
- Does not eliminate structural market imbalances;
- Potentially inflates consumption and, consequently, prices.
It is important to understand: Cashback is not about cheaper fuel. It is about deferred compensation for a high price that has already been paid.
The Math of the “Cycle”
According to our estimates:
- The budget spends 5–6 billion UAH on demand stimulation programs;
- Meanwhile, the annual volume of advance corporate income tax payments in the sector is 3.4 billion UAH.
A logical question arises: Wouldn’t it be more efficient to stop compensating for the effects and instead remove some of the causes?
What Could Work Better Right Now?
- Temporary suspension of advance payments for gas stations → This provides the market with liquidity and reduces price pressure without additional budget expenditures.
- Flexible tax adjustments during global price surges → This allows the final price for consumers to be contained while maintaining stable budget revenues.
- Preserving budget revenue through the tax base → When prices and sales volumes grow, the base for VAT and excise taxes expands. Therefore, even with adjusted rates, the state does not lose planned revenue—it recovers it through an expanded tax base.
- Supporting competition instead of narrowing it → Because it is competition that restrains prices, not cashback.
Breaking the Loop
Today, we have a situation where the state first creates additional financial pressure on the market and then compensates the consumer for it at the budget’s expense.
This is not a strategy. This is a cycle.
If we do not break this loop, we will be constantly “extinguishing fires” instead of removing the source of ignition. The fuel market is not just about the numbers on a gas station display; it is about competition, accessibility, logistics, and the country’s economic resilience. Decisions here must be systemic.
Tetiana Dumenkova,
Deputy Head of the Fuel and Energy Business Association (FEBA)
