The authors of the study note that construction, agriculture and industry, transportation – where the share of fuel costs reaches 30% – are the most sensitive to rising fuel costs. Under these conditions, the total cost of investment projects increases, which leads to a decrease in economic efficiency and deterioration of profitability indicators.
Also, rising fuel prices cause a chain reaction in the economy, including rising prices for goods and services, increasing inflationary pressure and leading to a general increase in production costs in other spheres. This, in turn, reduces aggregate demand and has a negative impact on the investment climate.
At the same time, investment risk and the cost of capital increase, which may lead to a reduction in foreign direct investment flows and more cautious behavior of investors.
Nevertheless, the authors believe that the current situation may stimulate economic modernization, contributing to more sustainable and effective solutions.
“Certain trends of economic adaptation are taking shape. For example, there is a growing interest in investments in energy efficiency, development of renewable energy sources and digitalization of economic processes. Fuel prices can also be seen as a catalyst for the structural transformation of the economy, directing investments into more sustainable and energy-efficient areas,” summarize Cheban and Yatsyshyn.
