The attack by the United States and Israel on Iran and the blockade of the Strait of Hormuz led to an increase in global oil prices. As a result, fuel prices increased by an average of 15% across the European Union. in the case of gasoline and by 30 percent. in the case of diesel fuel.
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According to FOR estimates, in Poland the increases were even greater: gasoline went up by over 20 percent, diesel by almost 40 percent. compared to February.
Yesterday, President Karol Nawrocki signed the government package “Fuel Prices Lower”, which assumes a reduction in VAT and excise duty, the introduction of maximum prices and work on a tax on “excess” profits of fuel companies.
According to government estimates, this means a decrease in state revenues by approximately PLN 1.6 billion per month, but at the same time a reduction in fuel prices by approximately PLN 1.20 per liter.
The Leszek Balcerowicz Foundation criticizes the idea of maximum fuel prices
President of FOR Marcin Zieliński in his latest announcement entitled “CPN – Politically Supervised Prices” criticized the idea of introducing maximum pricespointing to negative experiences from the past like in the USA in the 1970s, in Hungary in 2022 or in Poland before the elections in 2023 (fuel availability problems).
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Zieliński also notes that prices signal the relative scarcity of goods, in this case oil, and the introduction of a maximum rate may lead to shortages.
“The increase in fuel prices is a signal to car users that they should consider alternative ways of getting around (such as public transport, car sharing or cycling for shorter distances). The introduction of maximum prices falsifies this signal – people do not reduce fuel consumption, and when reserves run out, “dispenser failures” and shortages at stations begin.“- writes the president of FOR.
FOR: “Excess” profits or excess state in the economy?
Head of the foundation founded by prof. Leszek Balcerowicz also raised the issue of the government's willingness to tax “excess” profits of fuel companies.
As he emphasized, the main problem may be the level of such profits, which in such a solution can be determined in a discretionary manner. “When are profits still 'measured' and should be taxed on general terms, and when do they become 'excessive' and require extraordinary taxation? The limit will always be arbitrary and will result from the whim of the person making the assessment,” writes the head of FOR.
As he adds, another issue is: determining the source of the profit, including monopoly position, extraordinary efficiency of a given company or rapid price changes on the markets.
“Depending on what causes them, such profits will be a more or less short-term phenomenon. Rapid price changes, as is currently happening on the oil market, allow for high earnings in a short period of time. A monopoly position, especially when supported by the state, allows you to achieve high profits for years, because it is difficult or impossible for competitors to enter the market,” says Zieliński.
