Petrol and diesel prices keep climbing in Czechia: end of state price caps and Middle East tensions push costs higher

Fuel prices in Czechia are shooting up fast. According to data from CCS, which tracks prices at filling stations, a litre of diesel cost an average of 39.99 crowns on Sunday, 19 July — but just a week later it was already 2.5 crowns more expensive. Petrol is rising more slowly, up roughly 50 hellers a litre to 42.04 crowns.

The trend is especially stark at the budget chain Tank ONO, where a litre of diesel jumped from 37.50 to 42.50 crowns in just one week, while petrol rose from 39.50 to 40.50 crowns a litre.

One of the main drivers behind the price spike is the end of state price regulation. Until 19 July, the Ministry of Finance had set maximum allowable ceiling prices for retailers, but as of Monday, pricing has returned entirely to market forces. "Price regulation is only justified while an emergency situation persists in the market. In our view, that situation has now passed," explained Finance Minister Alena Schillerová (ANO).

The removal of the price cap coincided with an escalating conflict between the US and Iran in the Middle East, confirming analysts' fears that oil and fuel prices would keep rising. This is especially true for diesel, whose price at the pump is climbing even faster than crude oil prices on the exchanges.

The key reason is an acute diesel shortage in Europe. According to estimates by the US investment bank Morgan Stanley, European diesel reserves are currently at a multi-year low, and the situation is expected to worsen further in the coming months. Reserves are projected to bottom out this November at just 299 million barrels — the lowest level for this time of year since at least 2015.

"Czech drivers should brace for a further noticeable rise in diesel prices by the end of the year, or for prices to remain at a fairly high level," warned Lukáš Kovanda, chief economist at Trinity Bank.

Petr Lajsek, an analyst at Purple Trading, says it's not just about the full excise duty being reinstated. "Europe has long depended on diesel imports and is simultaneously suffering from disrupted supplies from Russia, limited refining capacity, and geopolitical tensions in the Middle East," he noted.

Only a resolution of the Middle East situation and the restoration of safe shipping lanes for oil tankers could halt rising pump prices. Otherwise, Czechia risks a repeat of this spring's scenario, when fuel at some filling stations topped 50 crowns a litre.

"If oil shipments are significantly reduced, or if the US takes further action against Iranian exports, Brent crude could quite quickly break through the $100-a-barrel mark. In that case, fuel prices in Czechia could climb back toward 50 crowns a litre within a few weeks, especially if the shortage of refined fuel persists," Lajsek warned earlier.

Amid rising prices, drivers in online discussions have accused fuel retailers of hiking margins as soon as regulation ended. Industry representatives, however, disagree. "Experience from the entire regulation period shows that the market effectively self-regulated, setting prices 0.70–1.50 crowns below the allowed ceiling. We expect this to continue, since it matches market dynamics from before regulation was introduced — and a significant share of stations never even reached that 'unofficial ceiling'," said Ivan Indráček, chairman of the Union of Independent Oil Traders.

The picture looks different at stations along major highways and in commercially attractive locations, where markups are traditionally higher. "These stations follow a different business strategy and have higher operating costs, but that also allows their owners to earn bigger profits. Higher prices in attractive locations are a general principle seen across most goods and services in any free-market country," Indráček added.

The persistent diesel shortage and its high price could once again push the state toward reintroducing regulation. "If prices start rising uncontrollably again, bringing back the price ceiling could very quickly land back on the table," suggested Jiří Tyleček, an analyst at XTB.

Kovanda believes the authorities could reinstate maximum prices fairly soon. "It's not so much the price of oil itself, but the ongoing tension in the diesel market that could ultimately force the Czech government to restore fuel price regulation — possibly within a matter of weeks," he said.

Despite lifting the blanket price cap, the Ministry of Finance says it continues to monitor the fuel market closely and stands ready to step in again should the situation critically worsen. The Price Act gives the ministry the authority to "pull the emergency brake," but in practice the entire legislative process — from government approval to issuing an official decree — would take at least several days.

Source: denik.cz