"Do Polish drivers, complaining about high fuel prices, realise that petrol in their country is the cheapest in the whole European Union? In addition, the outlook for 2019 looks less pessimistic than a few weeks ago," writes Marcin Lipka, Conotoxia Senior Analyst.
According to the European Commission's data, unleaded petrol cost 5.08 PLN per litre in Poland at the end of October, i.e. 1.18 EUR. This is definitely below the EU average of 1.48 EUR or the values observed in Italy (1.66 EUR/litre). Usually, however, drivers in Bulgaria and Romania have cheaper unleaded petrol than Poles. Sometimes lower prices are offered by stations in Hungary and sometimes even in rich Luxembourg. Why has Poland now become an EU leader in fuel prices?
Taxes and short-term disturbances
Although the differences between retail petrol prices in the Union are significant, in most cases they mainly depend on state taxes. Prices of fuels excluding VAT, excise duty, fuel duty or other national contributions are similar throughout the Community.
Currently, the average price per litre of petrol in the retail sector, excluding all compulsory taxes, is around 0.61 cents in the EU. It is cheaper in Poland, but the difference, although almost the largest in history, does not exceed four cents per litre in favour of those who refuel in Poland.
Most often, the price fluctuates within the range of 2 cents, and after periods of relatively cheaper fuels in Poland it usually shifts to zero for a certain period. Over the last two months, the price of petrol has been about 0.10 PLN per litre lower than it resulted from the long-term dependence of average prices in other EU countries. Sadly, retailers will not give up margins in the long run. They do it only occasionally in order to smooth out, for example, stronger increases in the wholesale market. Later, these temporary margin losses are pared when the price of the basic raw material, i.e. crude oil, drops.
Reduced pessimism for 2019
Strong drops in Iran's oil exports and problems in Venezuela caused Brent oil to exceed 85 USD per barrel at times this year. At the beginning of November, however, it is a dozen or so dollars below the highs. It is also possible that 2019 will start with even lower prices.
The growth in oil production in the USA is particularly welcome. On November 1st, the EIA published monthly data on US oil production, which showed that during the year (compared to August 2017) the increase in oil production in the United States amounted to 22.7% (by 2.1 million barrels per day). Currently, the Americans extract as much as 11.3 million barrels of oil (b/d) every day and are the largest producer of "black gold" in the world.
Record-high production in the USA means that the US imports less oil and its products from the world, which in turn signals that more of this basic energy resource remains for other countries. Average monthly net imports from January to August this year were only 2.88 million b/d. A year ago, in the same period, it was 4.18 million b/d, and in 2011, imports exceeded 8.5 million b/d.
The fact that the United States, according to Bloomberg, may allow the possibility of importing oil from Iran for a certain period of time may also be a positive element. Together with record production of this raw material in the USA, this may reduce the risk of insufficient supply in the following months, and in 2019, it could even lead to oversupply on the oil market and reconstruction of the recently lost stocks.
Chance for prices below 5 PLN per litre
The coming weeks will remain difficult for drivers. Retailers will be paring the margins lost in recent months, which means that despite the fall in prices of crude oil and fuels, unleaded petrol will remain slightly above the limit of 5.00 PLN per litre.
Diesel-powered cars will cost more. Diesel remains expensive on the European wholesale market and the period of low margins at stations has clearly come to an end. As a result, diesel may remain in the range of 5.20-5.30 PLN/litre in November.
At the turn of 2018 and 2019, however, the situation should slightly improve. Everything suggests that the supply of oil meets demand, and in such a scenario we should see Brent oil below 70 USD per barrel. As a result, there is a growing chance that both diesel and unleaded petrol will fall below the 5.00 PLN/litre limit.
