The sharp rise in fuel prices in recent weeks, driven by crude oil climbing above USD 100 per barrel in response to the blockade of the Strait of Hormuz, has forced the Polish authorities to react. Donald Tusk’s government has announced the CPN program — Ceny Paliwa Niżej (“Lower Fuel Prices”). The plan includes not only cutting the VAT rate on fuel from 23% to 8% and reducing excise duty, but also introducing a maximum retail price. Once the legislative process is completed, this last measure is intended to prevent prices from remaining elevated despite lower tax burdens.
Reducing VAT from 23% to 8% is expected to lower fuel prices by around 80 groszy per liter for 95-octane gasoline and by more than 1 zloty per liter for diesel. In addition, excise duty on fuel is to be cut to the minimum level allowed under EU regulations. Prime Minister Tusk said this reduction should amount to 29 groszy per liter of gasoline and 28 groszy per liter of diesel. According to the government’s announcement, total fuel prices are expected to fall by around PLN 1.20 per liter. Although the effect at filling stations should be immediate, it is worth emphasizing that the final price will still depend on market conditions. If wholesale fuel prices continue to rise along with crude oil prices, the scale of the reductions may be smaller.
A key element of the CPN program is the introduction of a so-called maximum retail price, which would be set daily by the Ministry of Energy. This price is to be determined on the basis of wholesale fuel prices and distribution costs.
The authorities now have to approve the VAT and excise cuts and put in place the mechanism for setting the maximum price. Donald Tusk has nevertheless announced that the reductions should already be visible at filling stations before the holidays. As the prime minister stated, the priority is to ensure fuel availability for Polish citizens, while in the event of “fuel tourism” from neighboring countries, the government is planning possible intervention measures. The prime minister also did not rule out introducing a windfall tax, which could affect the stock market valuations of companies in the sector.
It is worth noting that final fuel prices will continue to depend on market conditions — not only on crude oil prices, but also on the exchange rate of the US dollar. At the moment, a barrel of Brent crude costs just under PLN 400, while at the 2022 peak it was as high as PLN 550. If current market conditions do not change significantly, there is a chance that the price of 95-octane gasoline could fall toward PLN 5.90–6.00 per liter, while diesel could move closer to PLN 7 per liter.
Disclaimer: The information contained in this publication is for informational purposes only. It does not constitute financial advice or any other form of advice, is general in nature, and is not addressed to any specific recipient. Before using this information for any purpose, independent advice should be sought.
