The past few days at Polish petrol stations have brought a painful confrontation with geopolitical reality. Escalating tensions in the Middle East and reciprocal missile attacks between the United States and Iran have rapidly restored not merely a geopolitical premium to the market, but what analysts describe as a war premium.
The effects are already visible. At many petrol stations across Poland, the price of 95-octane petrol has exceeded the psychologically important threshold of PLN 7 per litre. Although the situation is causing concern, a sober analysis of the available facts and market commentary suggests that investors are not yet pricing in a scenario of complete chaos. Is that good news for Polish drivers?
Oil Approaches the Three-Digit Threshold as Donald Trump Changes Tactics
The key question for drivers’ household budgets is how high crude oil prices could rise. At their peak, Brent crude prices tested USD 87.50 per barrel, despite trading at around USD 70 per barrel at the beginning of July.
The current situation is still far from the panic observed in the spring. Brent has fallen back below USD 85 per barrel following Donald Trump’s latest comments. Although the United States has reinstated a naval blockade against Iran, while Iran has responded with targeted attacks on oil tankers, shipping through the strategically important Strait of Hormuz continues, albeit at a significantly reduced level.
The market currently appears to agree that, provided shipping traffic is maintained and the conflict does not enter a phase of extreme escalation — for example, through the physical seizure of Iran’s Kharg Island and its oil terminal — oil price increases should stop before reaching the three-digit level of USD 100 per barrel.
A surprising change in Donald Trump’s position has also helped ease negative market sentiment. The US president has withdrawn his earlier proposal to charge commercial vessels a 20% fee for military protection. Instead, the United States wants to act as a “security guarantor” in the Persian Gulf in exchange for favourable trade agreements and investments from wealthy Gulf states.
This pragmatic approach is reducing some of the speculative pressure on the market, although it does not guarantee that the Strait of Hormuz will remain fully open.
Orlen’s Wholesale Price Paradox and the Polish Driver’s Pain Threshold
From the perspective of Polish consumers, however, the scale of the price increases appears somewhat exaggerated. The market is currently facing a clear paradox.
Measured in Polish złoty, a barrel of crude oil now costs approximately PLN 325, dramatically less than in March, when the price approached PLN 450. Nevertheless, Orlen’s published wholesale prices remain only around PLN 0.10 per litre below their March peak. The current wholesale price of 95-octane petrol stands at PLN 5.64 per litre.
Wholesale diesel prices have increased slightly less, although diesel is the market currently experiencing the most serious supply shortage. This indicates that margins and expectations of possible tax increases for fuel companies have rapidly absorbed the benefits of the earlier decline in oil prices.
Where does the limit of drivers’ patience lie? All indications suggest that PLN 8 per litre of diesel would be the critical level at which public pressure could force the government to take radical action. Only at that point might the Ministry of Finance be compelled to cut excise duty again or reduce the VAT rate.
Costly CPN Programme in Doubt as Minister Sets Strict Conditions
Many drivers are looking to the government in the hope that the “Ceny Paliw Niżej” programme, abbreviated as CPN and meaning “Lower Fuel Prices”, will be reinstated. However, a repeat of this scenario currently appears unlikely.
Energy Minister Miłosz Motyka has confirmed that the ministry is working on contingency plans, but he has also set out clear conditions. For the CPN programme to return, the Strait of Hormuz would have to be completely blocked, pushing oil prices back towards the levels observed in March and April.
Why is the government so reluctant to reactivate the support scheme? The answer lies in its impact on the state budget. The CPN programme was extremely expensive, costing the government approximately PLN 5 billion.
At the same time, its effectiveness cannot be denied. The programme helped prevent inflation from causing more serious damage to consumers. As a result, annual inflation in June amounted to just 2.5%, exactly in line with the National Bank of Poland’s inflation target.
Unfortunately, the return to the full 23% VAT rate on fuel at the beginning of July, combined with the current turmoil in the Middle East, will almost certainly weaken these favourable statistics.
Inflation in July is likely to rise above 3% again. However, this would not necessarily trigger an immediate response from the National Bank of Poland, as such a reading would still remain within the permitted fluctuation band around the inflation target.
Instead of introducing another costly subsidy programme, the Ministry of Energy is reportedly considering a future mechanism that would force petrol stations to change their pricing policies.
The aim would be to prevent retailers from increasing prices immediately in response to movements on commodity exchanges, while requiring them to introduce reductions more quickly when the global situation stabilises. Similar mechanisms have already been introduced in other countries.
For now, however, such a solution remains a distant prospect. The coming weeks at Polish petrol stations will be dominated by efforts to keep fuel prices below the thresholds that, once exceeded, would hit consumers and businesses across the country.
Source: Managerplus.pl
