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PKN Orlen. Rapid reductions in wholesale fuel prices – Orlen’s chief economist Adam B. Czyżewski explains

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In recent days, PKN Orlen has sharply reduced wholesale fuel prices. “We are accused of having done it earlier. We could not, because the situation on the market is such that we would lead to queues at the stations – said the chief economist of the Płock concern Adam B. Czyżewski. In his opinion, there is no room for a drop in retail prices “due to limited supply”.

From January 1, 2023, VAT rates on motor fuels increased from 8 to 23 percent. This is due to changes in the so-called anti-inflation shield, which has been operating in a truncated form since this year. The fuel surcharge has also gone upby about PLN 0.14 per liter of petrol and by PLN 0.10 per liter of diesel.

On the other hand, on Saturday wholesale fuel prices in PKN Orlen dropped sharply. EU95 petrol and diesel prices fell by around 12% to their lowest levels since February/March 2022. There was another cut on Sunday.

– It is obvious, as the classic said, that we could pay less, but on January 1 we would pay more, so a different variant was chosen, that we would pay more in order to pay the same on January 1 – commented in an interview with TVN24 Prof. Marian Noga, economist, former member of the Monetary Policy Council.

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Orlen’s chief economist explains

The chief economist of PKN Orlen, Adam B. Czyżewski, in an interview with the Polish Press Agency, explained that in Poland the retail price was shaped so as not to lead to an increase in demand, which in the conditions of limited supply would have to end in queues at petrol stations and lack of fuel. Maintaining the price at a level that guarantees balancing supply and demand is a conscious policy all over the world, not only by PKN Orlen, he stressed.

– We are accused that since we lowered the price on December 30, we could have done it earlier. We couldn’t, because the situation on the market is such that we would lead to queues at stations. And now the retail price has not fallen because there is still no room for it to fall due to limited supply, Czyzewski explained.

He added that what matters to consumers is retail prices, these prices determine the demand for fuels and must take into account the market environment. – If they were too low, we would have to ration fuel. Worldwide, the supply is limited, fuels are simply in short supply and only when new refineries start operating in the second half of the year, the situation will improve and there will be more fuels – said the chief economist of PKN Orlen.

Example of Hungary

Czyzewski cited an example Hungarianwhere prices were frozen at too low a level for many months, which resulted in real fuel shortages at stations, and Hungarians had to go to refuel at Slovakia.

Recently, the price in Hungary has been released and is one of the highest in Europe. There was a shortage of fuel France in October 2022. Then – as a result of strikes – the supply could not keep up with the demand. The problem of fuel shortages has become a very important political and social issue, he stressed. In Hungary, the supply turned out to be insufficient in the conditions of increased demand, caused by the price reduction, pointed out the chief economist of PKN Orlen.

“Alternate Scenario”

Czyżewski assessed that 2022 was a very difficult year on the fuel market. Prices in the ARA (Amsterdam-Rotterdam-Antwerp) markets jumped from around $650/tonne at the beginning of the year to around $1,100/tonne in August. In Europe, product streams were diverted to replace fuel with Russia products in other parts of the world. Fuel was scarce in many countries and drivers were lining up in long queues, he pointed out.

– By understanding the difficult market situation and adapting the way of reacting to the return of the normal VAT rate on fuels, fuel prices in Poland have not increased, and the fuel is constantly delivered to stations. The alternative scenario, i.e. artificially low prices, fuel shortages, followed by a spike in prices and a strong inflationary impulse, would be definitely worse, said PKN Orlen’s chief economist.

Main photo source: PKN Orlen

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