Poland begins unwinding fuel-price shield as excise cut expires, VAT reduction stays until end of June

What the government announced

Poland's Ministry of Finance and Economy said on Monday that the CPN (Ceny Paliwa Niżej, or Lower Fuel Prices) programme will be gradually wound down. The reduced VAT rate of 8% on petrol, diesel and standalone biocomponents stays in place until 30 June 2026, but the excise-duty cut ends on Tuesday 16 June. The ministry cited the changing situation in the Middle East as the reason for the decision.

“In accordance with the decision of the Minister of Finance and Economy, the reduced VAT rate on the indicated fuels will apply until 30 June 2026. Due to the changing situation in the Middle East, it was decided to gradually limit the CPN programme.”

The ministry estimated that the excise reduction cost the budget 700 million złoty per month, while the VAT reduction cost 900 million złoty per month, for a combined monthly cost of 1.6 billion złoty.

What changes at the pump on Tuesday

From 16 June, the excise duty returns to its standard level: 29 groszy higher for petrol and 28 groszy higher for diesel. The maximum-price mechanism, set daily by the Minister of Energy, remains active alongside the 8% VAT rate. On Monday the energy ministry published its latest price notice: from Tuesday, the maximum price for 95-octane petrol is 5.97 zł per litre, 98-octane is 6.52 zł, and diesel is 6.37 zł. Those caps are lower than the Saturday-to-Monday caps of 6.04 zł, 6.58 zł and 6.40 zł respectively.

Inflation and price impact

Economists at PKO BP and Erste Bank Polska estimate that withdrawing the excise cut will raise retail fuel prices by more than 4% and push up CPI by 0.2 to 0.25 percentage points, spread across June and July. PKO BP analysts wrote that the per-litre increase of 28–29 groszy translates to a roughly 4.2% rise in the CPI fuel component. Erste Bank Polska put the fuel-price increase at 4.5% and the CPI effect at about 0.25 points, noting it could be partly offset by falling global crude prices.

“In mid-June fuel prices at stations will rise by 28 or 29 groszy per litre, which, other things being equal, will translate into an increase in average fuel prices in CPI terms of about 4.2% and will boost inflation by a total of about 0.2 percentage points.”

Why the government is acting now

Prime Minister Donald Tusk said on Saturday in Łomża that the government had always planned to run the subsidy only until the summer. He pointed to signals of progress in peace talks between the US, Israel and Iran, including the reported unblocking of Iranian funds by the United Arab Emirates, as grounds for hope that war-driven fuel price rises will halt and prices will return to normal levels.

“We assumed, and we delivered, that we would subsidise fuel prices until the summer so they would not shoot up. We had the cheapest fuel in Europe during this crisis, but of course we will be ending this project now, in the summer.”

Urszula Cieślak of the Reflex analytical bureau told TOK FM that if the entire package had been withdrawn at once (restoring both the 23% VAT and the full excise rate), the per-litre increase would have been several tens of groszy. Keeping the 8% VAT limits the immediate hit. Jakub Borowski, chief economist at Credit Agricole, said on the same station that the drop in crude prices following the US-Iran agreement looks likely to persist for some time.

How the CPN programme worked

Introduced at the end of March after the US-Israeli attack on Iran on 28 February sent crude and fuel prices soaring, the CPN package cut VAT from 23% to 8%, reduced excise to the EU minimum, and imposed a daily maximum-price formula. The maximum price is calculated from the average domestic wholesale price plus excise, a fuel surcharge, a retail margin of 0.30 zł per litre, and VAT. Stations selling above the cap face fines of up to 1 million złoty, enforced by the National Revenue Administration. On 31 March, the first day of the caps, 95-octane petrol was priced at a maximum of 6.16 zł, 98-octane at 6.76 zł, and diesel at 7.60 zł.

95-octane petrol (31 Mar)6.16

95-octane petrol (16 Jun)5.97

98-octane petrol (31 Mar)6.76

98-octane petrol (16 Jun)6.52

Diesel (31 Mar)7.6

Diesel (16 Jun)6.37

95-octane petrol (31 Mar)

6.16 zł/litre

95-octane petrol (16 Jun)

5.97 zł/litre

98-octane petrol (31 Mar)

6.76 zł/litre

98-octane petrol (16 Jun)

6.52 zł/litre

Diesel (31 Mar)

7.6 zł/litre

Diesel (16 Jun)

6.37 zł/litre

Data from the article text

Poland still has the cheapest fuel in the European Union, according to Monday's data: standard petrol at 6.04 zł per litre and diesel at 6.40 zł. The next maximum-price notice, setting caps for Wednesday, will be published on Tuesday.