Poland caps fuel prices, cuts VAT to ease inflation amid global oil surge

ISTANBUL

Poland will impose its first fuel price cap starting on Tuesday, Energy Minister Milosz Motyka announced, as the government seeks to protect consumers from soaring global oil prices.

“Let’s remember that when prices at gas stations actually change depends on administrative, legislative and technical factors, such as adapting systems and cash registers,” Motyka said, according to TVP World.

Under a notice published on Monday, 95-octane petrol will be capped at 6.16 zloty ($1.64) per liter, diesel at 7.60 zloty ($2.03), and higher-grade 98 petrol at 6.76 zloty ($1.80).

The emergency nationwide cap is set daily by the energy minister in response to rapidly rising fuel prices, triggered in part by the US and Israel’s war on Iran.

The Finance Ministry estimated the measure will cost the budget around 700 million zloty ($171 million) per month. Retailers charging above the limit face fines of up to 1 million zloty ($265,000).

The cap is calculated based on average wholesale fuel prices in Poland, plus excise duty, a fuel surcharge, a fixed retail margin of 0.30 zloty ($0.08) per liter, and VAT.

As part of a broader legislative package, the government also cut VAT on fuels to 8% from 23% starting March 31 and reduced excise duties to the minimum levels allowed under European Union rules. The VAT reduction will cost about 900 million zloty ($221 million) monthly.

Polish Prime Minister Donald Tusk said the package aims to lower pump prices and ease inflationary pressure. He added the government could consider a windfall tax on fuel companies if excessive profits are identified.

The US-Israel war with Iran and tensions in the Strait of Hormuz have disrupted energy flows, contributing to shortages and price pressures worldwide.

On March 2, Iran announced restrictions on navigation in the Strait of Hormuz, a key transit route for oil tankers, threatening to attack any vessels attempting to pass without coordination.

About 20 million barrels of oil transit the strait daily, and its effective closure has driven up oil prices and shipping and insurance costs, triggering global economic concerns.