Oil prices fell by almost 5 percent yesterday, reaching their lowest level since the beginning of the conflict in the Middle East. Markets reacted enthusiastically to Donald Trump\u2019s announcement that an agreement with Iran could be reached. For Polish drivers, however, the good news may prove short-lived. The government is planning to gradually phase out the CPN programme, which would mean the return of higher excise duty and VAT on fuels. As a result, Poland may lose what has often been described as the cheapest fuel in the European Union. At the same time, the proposed peace agreement looks more like a ceasefire than a lasting solution to the conflict. Paradoxically, the coming weeks, and perhaps even months, could become more nervous for drivers in Poland without the CPN programme than the previous months of the conflict.<\/p>\n
Donald Trump announced that a peace agreement with Iran could be concluded this week, triggering a sharp reaction on the oil market. After the announcement on Monday, US WTI crude fell by 4.8 percent to USD 80.75 per barrel, while Brent dropped by 4.7 percent to USD 83.17. These were the lowest levels since the beginning of March, that is, since the first days of the war. Oil prices had already been falling in previous days, as the market had for some time been pricing in the possibility of an agreement.<\/p>\n
Stock markets also reacted positively to the prospect of a deal. The S&P 500 index rose by 1.6 percent on Monday, while the Nasdaq gained 3 percent, mainly thanks to companies linked to artificial intelligence. Investors concluded that a calming of the oil market could ease inflationary pressure and reduce the risk of further interest rate hikes. This is particularly important for technology companies, which are carrying out huge investments often financed with debt. In Warsaw, the broad WIG index reached a historic high, although in the second part of the session investors began taking profits after earlier gains.<\/p>\n
The content of the agreement itself has not yet been disclosed. Many indications suggest that it will not bring lasting peace, but rather extend the ceasefire and formalise arrangements concerning the functioning of the Strait of Hormuz. According to media reports, the document provides for an end to hostilities, a partial reopening of the maritime route and the start of further negotiations, which are expected to last 60 days. Donald Trump announced that the strait is already partially open and that shipping is to be restored from Friday. Iran, however, claims that the entire process could take as long as 30 days.<\/p>\n
This is only the beginning of more difficult talks concerning, among other issues, Iran\u2019s nuclear programme and the unfreezing of the country\u2019s foreign assets. Such negotiations are usually long, complex and full of tension. The risk of further crises remains high, especially as Iran has seen how effective control over the Strait of Hormuz can be as a tool of pressure. It is difficult to assume that Tehran will completely give up such an important bargaining chip.<\/p>\n
This means that despite the current decline in oil prices, the market remains highly sensitive to any information concerning the region. Global fuel prices are still more than 25 percent higher than before the outbreak of the conflict, when oil cost around USD 65\u201370 per barrel. Meanwhile, Polish consumers may soon lose the additional protection provided by the CPN programme.<\/p>\n
The government has announced that the programme will be phased out gradually. First, higher excise duty would return, after previously being reduced by around PLN 0.30 per litre of fuel. Then the VAT rate would rise again to 23 percent. In total, this could mean an increase in fuel prices of up to around PLN 1 per litre. The programme is costly for public finances. Cuts in excise duty and VAT reduce budget revenues by more than PLN 1.5 billion per month. The government wants to recover part of these costs through a tax on windfall profits of fuel companies. It is expected to apply to producers and sellers generating above-average profits, with the rate set at 60 percent.<\/p>\n
The CPN programme helped limit the impact of rising oil prices on inflation in Poland. In May, inflation stood at 3.1 percent year on year, compared with 3.2 percent a month earlier. Thanks to this, Poland was among the few countries that avoided a sharp rise in prices after the outbreak of the conflict. The key question, however, is how fuel prices will behave in the coming months and how quickly the government decides to withdraw from tax shields.<\/p>\n
Markets are currently celebrating the prospect of peace, but they are also aware that the present agreement is only the beginning of a long road that may, eventually, lead to lasting stabilisation of the energy market. In many countries, the earlier energy shock has already spread through the wider economy, pushing up prices of services and wages. This is precisely what central banks fear most, as they increasingly warn about the risk of elevated inflation persisting even after oil prices stabilise.<\/p>\n
A full normalisation of transport through the Strait of Hormuz requires several months of calm. Investors should therefore avoid declaring the agreement a complete success too early. The asymmetry of risk remains particularly important. Problems with implementing the announced arrangements could quickly lead both to another rise in oil prices and to a deterioration in sentiment on global stock markets. For this reason, caution and a realistic assessment of the situation are now more advisable than euphoria.<\/p>\n","protected":false},"excerpt":{"rendered":"
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