Diesel fuel prices are already at record highs in Poland, but there are fears the situation on the Polish fuel market could become much worse. With the Saudi East-West pipeline now down after a series of drone strikes, not only prices are an issue but obtaining sufficient fuel supply could be the real worst-case scenario.
On Sept. 10, the East-West pipeline, which transports oil from Saudi Arabia’s oil fields to a port on the Red Sea, was hit with a wave of drone strikes from Iraq. The pipeline transmits 7 million barrels a day and was one of the most important ways to bypass the blocked Strait of Hormuz. There is still significant speculation of when the bombed out pumping station will reopen. A longer shutdown could have devastating consequences, as some experts predict. This oil supply accounts for approximately 4 percent of global oil flows and the question now remains whether repairs to the pumping station could just produce yet another round of drone strikes.
Polish drivers may also feel the consequences very soon. As Adam Sikorski, president of Unimot, points out, the market situation was already difficult before the escalation.
“The economy is inexorable. The published wholesale price of diesel fuel on Friday, including VAT, was already PLN 8.95 per liter ·(€2.07). At this level of wholesale price, the retail price above PLN 9 per liter may start appearing at other stations ” he told Polish media outlet Fakt.
Prices at stations are reacting with a delay because the fuel currently sold may have been purchased earlier, at lower prices.
How bad can it get?
An additional problem is the insufficient refining capacities in Europe and the shutdown of some plants in the Middle East. According to Sikorski, this leads to record refining profit margins.
“It is really very close to fuel in the country reaching PLN 10 per liter. And this is unfortunately not the most pessimistic scenario,” warns the president of Unimot.
The largest gas and oil company in Poland, Orlen, also commented on the situation. The company assures that it has a diversified portfolio of suppliers and its own resources, thanks to which it can respond to changes in the global market. The government may try to mitigate increases through tax changes, e.g. concerning VAT or excise duties.
Sikorski points out, however, that artificially lowering prices may increase demand in a situation of limited supply.
The most worrying scenario, however, is one in which the problem ceases to be the price itself.
“In an extreme scenario, I would no longer focus on price. The physical availability of fuels could become a much more serious problem,” warned the Unimot president.
