End of fuel price caps: petrol and diesel set to jump by up to five crowns a litre in Czechia

With the government's price caps on fuel expiring, diesel could become roughly five crowns more expensive per litre within a week, while petrol may rise by 1.70–2 crowns, according to Finlord analyst Boris Tomčak.

He says the situation on the wholesale market looks unfavourable for drivers: over the past week, diesel has already gone up by three crowns per litre and petrol by two crowns. On top of that, another 2.30 crowns will be added once the reduced excise duty is scrapped. All told, diesel could end up costing almost five crowns more per litre.

The government introduced fuel price caps back in April in response to a sharp spike in oil prices triggered by US and Israeli strikes on Iran in late February and early March. The market was hit especially hard by Iran's blockade of the Strait of Hormuz, through which roughly a fifth of the world's oil and gas supplies typically pass.

According to Tomčak's forecast, by the end of the week diesel could average around 43 crowns per litre, and petrol around 42 crowns. Data from CCS, a company that tracks fuel prices, showed diesel at 37.97 crowns and petrol at 40.30 crowns on Thursday. The last maximum weekend prices set by the government were 43.41 crowns per litre for petrol and 42.13 crowns for diesel.

Štěpán Křeček, chief economist at BH Securities, believes the removal of trade-margin regulation is coming about a month later than it should have. "What's more, it coincided with a turnaround in the market, with oil prices climbing significantly," he noted.

While North Sea Brent crude, the global pricing benchmark, was trading at around 70 dollars a barrel in early July, by Friday afternoon its price had already reached 86 dollars.

"That's showing up at Czech petrol stations too. Since the start of July, petrol prices have risen by more than a crown, and diesel even more — over two crowns. Prices would have kept climbing regardless, even if fuel retailers' margins had remained regulated and the excise duty cut hadn't been scrapped," Křeček added. He estimates diesel will rise by roughly four crowns and petrol by 1.70 crowns over the coming week.

Filling up on the motorways will get even pricier. The price gap between motorway and Prague petrol stations and those in the rest of the country is set to widen again. Tomčak says motorway prices could climb three to four crowns above the average, with diesel there approaching 47 crowns. "But I don't think that will happen as soon as next week — the price rise there will be gradual," he added.

Another factor pushing prices up is that traditional fuel exporters, Russia among them, now find themselves needing to import fuel instead. "Fuel stocks in Central Europe are currently 29% below the long-term average for petrol and 13% below for diesel," Křeček calculated.

Tomčak notes that refinery margins across the European market are also climbing noticeably: for diesel they've hit this year's peak of around 65 dollars a barrel, while for petrol they've topped 40 dollars — the highest level in four years.

"Diesel supply has shrunk mainly because of Ukrainian strikes on Russian oil refineries. Russia, previously the world's second-largest exporter after the US, has had to ban exports. There's also a shortage of diesel and petrol coming out of the Persian Gulf region," Tomčak concluded.

Around Prague, based on reporting by novinky.cz