by Andrzej Ratajczyk
29-06-05
The growth of oil prices on international markets may have a negative influence not only on the Polish fuel market but the entire economy.
On June 23, for the first time ever, the price of oil on the NYMEX exchange in
New York exceeded $ 60 a barrel. Admittedly, this record level was not
sustained, and August contracts finally closed at $ 59.42, going up by $ 1.33 in
all. However, even that brief overshooting of the $ 60 mark may suggest that
further increases are in store. On the International Petroleum Exchange in
London, the price of Brent oil from the North Sea increased by $ 1.42 to $ 58
per barrel.
There are several reasons behind the current trend. Despite promises, producers are incapable of increasing extraction -- refineries around the world are already working at full tilt. In Iraq, attacks on oil installations continue to be reported, in Nigeria there is a growing threat of attacks on the foreign personnel of oil corporations, and in the Caribbean the hurricane season has begun in earnest.
The current level of supply means that any disruptions in deliveries from any of
the major producers might lead to major problems on the market. On the other
side, demand keeps growing, especially in Asian countries such as China and
India.
If oil prices continue to rise around the world, cheaper gasoline is out of the question anytime soon and forecasts for the coming months do not augur well for drivers. On the NYMEX, the prices of futures contracts tied to oil (Light Sweet) to be delivered after more than three months have already exceeded $ 60, which means the market expects further growth. Analysts expect further increases due to higher demand during the vacation season.
Currency exchange rates exert a major influence on gasoline prices in Poland
because Polish corporations pay for oil in dollars. The zloty is now losing
ground against the dollar, additionally jacking up the price of fuel.
“Further price increases in wholesale will certainly be felt directly by consumers at gas stations if oil prices continue their upward swing,” said Urszula Cieclak from Biuro Reflex, a company monitoring the fuel market. According to Reflex data, the average retail price of Euro 95 gasoline increased in the first week of June by almost 1 % to Zl. 3.96 per litre. At the moment, it is difficult to buy gasoline for less than Zl. 4 per litre.
“Unless the trend reverses, the price of 95-octane gasoline may increase to as
much as Zl. 4.25 per litre,” said Cieclak.
Dawid Piekarz, spokesman for PKN Orlen, Poland’s largest fuel producer, says
that optimistically the oil price increases in Poland are offset by the fact
that the corporation has access to relatively cheaper Russian raw material.
Since the start of this year, oil prices have gone up by a total of 35 %,
with an increase of 58 % in the past 12 months alone. These increases have led
to higher energy and transport costs, which in turn may affect consumption
spending and the performance of the corporate sector. On a global scale, this
may slow down the growth of the world economy, including that of Poland.
The first to be affected will be consumers using transport services, an
especially painful blow considering the vacation season is now underway. The
costs of travelling abroad by car will go up markedly.
Air transport costs will also increase. Airlines have already agreed that travellers must cover part of the cost now that the price of aircraft fuel has increased. In the case of LOT Polish Airlines, tickets on domestic routes are already EUR 7 more expensive on average, on European routes -- up by EUR 10 and on trans-Atlantic routes -- by EUR 15. Other carriers have also introduced extra fees, some of them substantial. As oil and fuel prices continue to rise, consumers must be prepared for further expenses. They should also be prepared for higher trip packages from some travel agencies, which are under pressure from foreign partners.
Economists have no doubt that the current level of oil prices will affect economic growth, if not this year then certainly next year -- though the actual effect is difficult to predict. Earlier experts estimated that economic growth would slow down if oil reached a level of $ 50 per barrel, and statistics show that the demand for oil is higher than a year ago. For the time being, the high price of oil is not a barrier to growth.
Bolescaw Dolicski of the Polish Chamber of Liquid Fuels says that, in the
current situation, the Ministry of Finance should accept a reduction of excise
tax or suspend its collection for a time. At the moment in Poland, excise tax on
gasoline is Zl. 1,565 per 1,000 litres plus 22 % VAT. This means that if
consumers pay about Zl. 4 for a litre of gasoline, the taxman pockets half of
this amount.
However, excise tax on gasoline does not have to be that high. The current EU minimum is EUR 287 per 1,000 litres. In zloty terms (with the zloty trading to the EUR at 4.08), the minimum is Zl. 1,162. This means that the Ministry of Finance could reduce the tax by Zl. 400 per 1,000 litres, deflating the price of gasoline by Zl. 0.40 per litre. In May last year, the Ministry of Finance, in a reaction to growing fuel prices, cut the excise tax on gasoline by 5 groszy per litre.
The Ministry of Finance has ruled out the possibility of a new reduction in
excise tax on fuel.
“At the moment, a reduction is not necessary,” said Finance Minister Miroscaw
Gronicki. “Even a 5-% cut will not change the situation on the fuel market.”
Source: The Warsaw Voice