On Monday, September 21, oil prices on exchanges fell to their lowest level in 11 days: the November Brent contract was trading at $101.75 per barrel, losing $2.12, or 2%, while October WTI dropped to $98.34, down $1.96. For a driver at a gas station in Kyiv or Dnipro, this remains more of a news headline than a change in pump prices: fuel in Ukraine has already noticeably become more expensive in September, and the link between the exchange and the gas pump is far more complex than it appears.
Where the hopes for cheaper oil came from
The drop in quotations is linked to expectations of diplomatic progress between the United States and Iran ahead of this week's UN General Assembly meeting in New York, as well as the partial recovery of supplies from Saudi Arabia. US President Donald Trump said he is ready to meet with Iranian President Masoud Pezeshkian, who is expected at the General Assembly, although the parties had exchanged fresh threats beforehand.
"It appears that a certain level of risk premium is being removed from oil prices in hopes that a diplomatic path to de-escalation of the US-Iran conflict may emerge this week," said Tim Waterer, chief market analyst at KCM Trade. Mohsen Rezaei, head of Iran's security service, told Al Jazeera that Tehran has already passed its conditions for resuming negotiations to mediators.
Why the tension hasn't really disappeared
The market has calmed down about negotiations, but not about actual attacks on oil infrastructure. Iran-backed Yemeni Houthis claimed they attacked objects in Riyadh and an Aramco facility in Yanbu—a key oil export hub on the Red Sea—with missiles and drones on Saturday.
Iran will use new weapons and attack sites that have not been attacked before if the US launches a new offensive against it, said a spokesman for Iran's Islamic Revolutionary Guard Corps, according to the Fars agency.
Fearing further destabilization, China asked Iran to help restrain the Houthis following Saudi Arabia's appeal to Beijing—three Iranian sources familiar with the matter reported. Saudi Arabia, meanwhile, has increased exports through the Strait of Hormuz: according to satellite data, the volume of transportation has grown to 2.9 million barrels per day over the past six days compared to just 700,000 barrels in August. "Oil flows in the Middle East remain surprisingly strong despite disruptions to Saudi Arabia's East-West Pipeline," JPMorgan analysts noted.
What this means at the pump in Ukraine
A key nuance for Ukrainian consumers: since Ukraine imports refined petroleum products, changes in their cost on foreign markets fairly quickly affect the domestic market. However, the mechanism is not a direct projection from the exchange to the price tag—pricing can conditionally be broken down into several components: world quotations, supplier premiums, and Ukrainian taxes. So a $2 drop in Brent does not automatically translate into a discount at the pump—the hryvnia exchange rate and the tax portion of the formula can eat up the entire effect.
This is exactly what happened in September: prices for gasoline and diesel in Ukraine rose noticeably against the backdrop of expensive petroleum products on the global market, and according to experts' assessments, fuel continues to become more expensive even when global quotations remain relatively stable—a similar picture was already recorded when oil held at around $110 per barrel. In other words, for a Ukrainian driver, what matters more is not what appears in the exchange feed on Monday, but what happens to the hryvnia, excise taxes, and supplier logistics in the coming weeks.
If Trump's meeting with Pezeshkian at the UN General Assembly this week truly yields diplomatic progress and the Houthis stop attacking Saudi infrastructure, the risk premium may finally disappear from oil prices. But whether Ukrainian drivers feel this in their wallets depends not on Brent, but on whether the tax and exchange rate components of the formula will allow this discount to reach the pump.
