Obtaining reliable distance estimates to gas clouds within the Milky Way ischallenging in the absence of certain tracers. The kinematic distance approachhas been used as an alternative, derived from the assumption of circulartrajectories around the Galactic centre. Consequently, significant errors areexpected in regions where gas flow deviates from purely circular motions. Weaim to quantify the systematic errors that arise from the kinematic distancemethod in the presence of a Galactic potential that is non-axisymmetric. Weinvestigate how these errors differ in certain regions of the Galaxy and howthey relate to the underlying dynamics. We perform 2D hydrodynamical simulationof the gas disk with the moving-mesh code Arepo, adding the capability of usingan external potential provided by the Agama library for galactic dynamics. Weintroduce a new analytic potential of the Milky Way, taking elements fromexisting models and adjusting parameters to match recent observationalconstraints. In line with results of previous studies, we report significanterrors in the kinematic distance estimate for gas close to the Sun, along sightlines towards the Galactic centre and anti-centre, and associated with theGalactic bar. Kinematic distance errors are low within the spiral arms as gasresides close to local potential minima and the resulting LOS velocity issimilar to what is expected for an axisymmetric potential. Interarm regionsexhibit large deviations at any given Galactic radius. This is caused by thegas being sped up or slowed down as it travels into or out of spiral arms. Inaddition, we identify 'zones of avoidance' in the lv-diagram, where thekinematic distance method is particularly unreliable and should only be usedwith caution, and we find a power law relation between the kinematic distanceerror and the deviation of the projected LOS velocity from circular motion.