Poland to Relaunch Fuel Price Cap Program Amid Budget Concerns

Poland's government is preparing to re-announce a program to lower fuel prices, a move that could offer relief to drivers grappling with high costs. The initiative, reportedly named "Ceny Paliw Niżej" (CPN), is expected to be detailed at a press conference by Prime Minister Donald Tusk.

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The situation on the oil market is stabilizing. Of course, we know that prices at petrol stations are still high, and we would like them to be lower. However, we have certain budget limitations, and President Nawrocki decided to block the law (on extraordinary profits of fuel companies), thanks to which we would have a little over 4 billion zloty more in the budget.

This potential return of CPN comes as fuel prices remain a concern for Polish motorists. A similar program that expired at the end of June had involved a reduced VAT rate on fuels and a maximum price cap at stations. The government had previously indicated a willingness to reintroduce price controls, at least temporarily, if global oil prices surged due to Middle East instability.

However, the government faces significant financial and political challenges. Minister of Finance and Economy Andrzej Domański noted that while stabilizing oil markets are a positive sign, high pump prices persist. He pointed to budget limitations and a presidential veto on a windfall tax for oil companies, which would have provided over 4 billion Polish zloty to the budget, as key obstacles. Currently, only a VAT reduction on fuel is legislatively feasible, but a final decision is pending.

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But whether such a decision will be made, we still have to leave ourselves a few days.

Further complicating matters, the presidential veto on the windfall tax law has hindered the government's intervention capabilities. Minister of Energy Miłosz Motyka explained that while the initial plan targeted oil companies' profits, they are now exploring taxing gas companies or adapting the tax to resemble the CIT tax on banks. The president's office, however, has not been swayed by arguments that similar taxes were effective under the previous government.

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The president's decision to refer the tax law to the Constitutional Tribunal hinders our interventions here. We are currently considering various options. In the first step, we planned to cover the profits of fuel companies with a new tax. We are currently analyzing the possible coverage of gas companies' profits with a new tax. We are also considering making the new version of the tax similar to the CIT tax on banks. However, the president's decisions hinder our room for maneuver.