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Issue surcharge. Now we can pay double

18 Dec 2018 12:12|Marcin Lipka

"Polish drivers continue to pay a lot for fuel, as retailers are not eager to reduce prices according to changes in the wholesale market. Why is this happening? Probably petrol station owners are already preparing to introduce a new issue surcharge," writes Marcin Lipka, Conotoxia Senior Analyst.

After sharp drops in fuel prices observed in October and November, prices on the European wholesale market (ARA - Amsterdam-Rotterdam-Antwerp) have stayed stable for more than 3 weeks. Petrol in Poland costs around 1.40-1.50 PLN per litre, and refineries offer diesel oil at about 1.80-1.90 PLN.

In turn, retail fuel prices in the European Union are still declining as a result of earlier reductions in the wholesale market. According to the European Commission's data, a litre of unleaded petrol costs on average of 52.3 euro cents in the EU, i.e. 2.25 PLN, while diesel costs 61.1 euro cents so 2.62 PLN, excluding taxes and charges. In both cases, the prices in Poland are higher than the EU average and amount to 53 and 63 euro cents (EC data). It would seem that the differences are insignificant, but usually, fuel prices in Poland, excluding taxes and charges, were lower than in the EU. Why now is there a relationship reversal?

Diesel without taxes the most expensive in the whole of Europe

Fuel prices are usually analysed together with taxes and other charges, but it is worth looking at the values excluding these components. Then, it will be easier to better show why in Poland fuels, and diesel, in particular, cost almost the most in the EU.

Over the last few years, the margin (wholesale and retail sum) calculated as the difference between the price at stations (excluding taxes) and the price of ARA in Poland was at the level of 0.40-0.60 PLN per litre for diesel. In the EU it was higher - 0.50-0.70 PLN. Therefore, the differences are not significant and result from labour costs, distance from refineries or logistic charges. For example, in Sweden or Finland diesel is expensive (even after excluding taxes) due to relatively low population density and long delivery distances.

Recent weeks have seen characterised by a margin of almost 1 PLN per litre of diesel in Poland. It was the highest value in at least several years. Currently, it has fallen to 0.88 PLN. In the EU, the margin on diesel is also high, but even at the top it was lower than in Poland, and in the second week of December it was 0.80 PLN, i.e. 0.08 PLN less than Poland, although usually in the EU it is about 0.10 PLN/litre higher. In only 5 out of 28 EU member states, excluding taxes, diesel costs more than at Polish stations.

In the long run, nobody will accept issue surcharge…

In Poland, from 2019, a new tax will be added to both the price of diesel and unleaded petrol. It will amount to 0.08 PLN net per litre. To this should be added 23% VAT, which means that consumers should pay about 0.10 PLN more for each litre of fuel compared to the scenario without new fiscal burdens.

Domestic oil companies have been announcing that they will bear the cost of the issue surcharge in recent months, but in the long run, this is completely unrealistic. This is suggested by the opinion of the Bureau of Parliamentary Analysis (BAS) assessing the amendments to the Act on Bio-components and Biofuels.

BAS writes that "in the long run, its costs will be passed on directly or indirectly to buyers, as was the case with the tax on some financial institutions (the so-called bank tax)".

This longer perspective is not fully defined. The distribution of the fee may take weeks, especially if the market leaders want to fulfil their promise. This, in turn, may mean the prospect of a much lower margin since the beginning of the year for other market participants who operate entirely on a commercial basis.

... that's why we are now paying double

As a result, petrol stations have become extremely cautious in price reductions, which is shown by record margins on diesel and higher prices, excluding taxes, of diesel and petrol in Poland than in the EU. What is the cost of all this for us?

Net fuel prices may on average be up to 0.15 PLN higher per litre. This is roughly double the new fiscal burden on fuels. As approximately 2 billion litres of fuels are sold monthly in Poland (BAS data shows that 25.5 billion litres per year), in December alone buyers of petrol or diesel may lose more than 350 million PLN in total, plus VAT.

Eventually, entrepreneurs and consumers started to pay double the cost of the issue fee even before its introduction, although they were not supposed to be burdened with it, even after the fee entered into force.

18 Dec 2018 12:12|Marcin Lipka

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