Liquid fuels market – draft amendment to the Energy Act

The setting of the maximum margin for trade in liquid fuels is regulated in a draft amendment to the energy law addressed to the Sejm by a group of deputies from the left.

Amendment of the Energy Act (liquid fuel market)

Given the constantly rising prices of liquid fuels and the specter of the imminent return of the increased VAT rate on their sales (on February 1 of this year, VAT was reduced from the 23% rate to the 8% rate – initially for six months), and then extended this period to October 31, 2022), on July 7, 2022, a group of MPs from the left submitted a draft bill amending the Energy Act to the Sejm.

Fuel Margins

The proposed amendment concerns the legal regulation of the level of fuel margins, including in the law the concepts of “maximum commercial margin” and “maximum wholesale margin”, which are set at a fixed, uniform level, and the enforcement of the application of the provisions will be entrusted to the Energy Regulation Agency (BRO).

According to the reports of the shareholders of the largest fuel companies in Poland from the first quarter of 2022 (ie during the period of the reduced VAT rate), these entities recorded record profits compared to recent years.

The current situation on the fuel market is comparable to the situation in 2006, when the Council of Ministers decided to lower the excise duty on the fuel trade, which also translated into price increases at filling stations. This leads to the conclusion that, then as now, the fuel companies have used the indirect tax cut to increase their margins, bringing fuel prices in line with pre-tax prices. Currently, despite the weak PLN/USD exchange rate and the war in Ukraine, the prices of a barrel of crude oil on world markets as well as the costs of handling, processing and transporting goods do not justify the constant price increases of liquid fuels.

It is also worth noting here that high fuel prices translate directly into price increases of consumer goods by increasing the cost of transportation and storage of products, and thus – they also fuel the rise in inflation, forcing the end users of services and goods into the pockets of less and less financial resources. This ultimately translates into a sustained boost in inflation and the quality of life of the population.

The amendment to the Energy Act provides for the determination of the maximum margin for trade in liquid fuels at PLN 0.10 per liter of fuel in the retail sector and the maximum wholesale margin for unleaded petrol (Pb 95): PLN 120 per m3 and PLN 150 per m3 for diesel oil. The regulation also introduces an obligation for companies engaged in the liquid fuel trade to submit reports on their activities, which will be reviewed and audited by the Energy Regulatory Office. The BHV will also be able to discipline companies that do not comply with the obligation to maintain the above-mentioned maximum margins by, among other things, imposing severe financial sanctions and transferring surpluses of undue profits (excess margins) to the Treasury.

A reduction in the petrol price?

If the bill in question is passed in its current form, a reduction in the prices of unleaded petrol Pb95 by about 1.60 PLN/litre and the price of diesel oil by about 1.10 PLN/litre is predicted.

In the context of the current economic situation in Poland and in the world, it is difficult to refuse the proposed changes in equity capital, which will improve the current ineffective solutions of the government, i.e. a simple reduction in the VAT rate and stabilize. This solution was adopted from the start on the assumption that it was temporary and as a result of its implementation there was no permanent price reduction at service stations.

Overview

It remains to be hoped that the bill amending the Energy Act will be approved by the Sejm and implemented as a matter of urgency, or at least – before October 31, 2022, when VAT rates return to their previous, pre-pandemic levels. .

Author: adw. Jakub Gawłowski, Chałas i Wspólnicy Law Firm

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