Orlen is making an incredible amount of money off the conflict in the Middle East, with fuel prices soaring and the Tusk-led government taking no action to intervene.
Economist Janusz Szewczal, who was a former member of the Orlen management board, says that Orlen “is making incredible money, and it seems that the management of both the Ministry of Finance and the company are playing with fire.”
He explained to Do Rzeczy that this has been possible due to prices at the pump being as high as almost PLN 9 (€2,11) per liter of diesel at some stations.
“It doesn’t seem to be causing any major social protests,” he noted. “We remember this absolutely hateful black PR campaign, when fuel was 6 PLN and reached 8 PLN in the case of diesel during the outbreak of the war in Ukraine and during the COVID pandemic,” he recalled.
According to Janusz Szewczak, “the government has adopted a completely wrong concept of ignoring the systematic increase in fuel prices.”
“Although it was obvious that the conflict in the Middle East would deepen and last for weeks, counting on this being a temporary event that will soon end is very risky. Because not only is the price of a barrel of oil rising, but supply chains are also being disrupted,” he said.
On the topic of Tusk’s “dark hour,” the economist said that countries that take action early “have a better chance of calming the mood.” Spain has introduced VAT cuts to help consumers, while Hungary introduced price caps on gasoline.
However, in Poland, Szewczak states that you have “the cunning of the Ministry of Finance and the Orlen management – let’s squeeze as much as we can while prices are rising and people are not making a big drama yet, they just pay and cry.”
“This is due to the absolutely dire situation in public finances and the state budget. It appears that the budget deficit after the first quarter of this year will be around PLN 100 billion,” he said.
Szewczak noted that “there is a significant lack of money for the health service, to such an extent that this SAFE is probably an emergency loan to fill – at least through an advance payment – the hole in the National Health Fund budget.”
“Otherwise, it may turn out that in May or June there simply isn’t enough money and there won’t be any for healthcare. This is a dramatic situation, because we already have some limitations in our activities related to the limits, but also some overpayments are still unpaid,” he explained.
Discussing the negative impact of higher diesel prices, Szewczak said that sectors across the economy will suffer, including farmers who primarily use diesel for their equipment.
He emphasized that “this will also immediately impact transportation and wholesale delivery prices to stores, meaning prices could rise significantly, taking into account the significantly higher fuel costs for logistics companies.”
“Besides, the Polish transport and logistics industry is already on the brink of bankruptcy,” he added, before noting the “drastic impact” on fertilizer prices as well as the chemical sector.
The economist again criticized the government’s approach: “Waiting with folded arms to squeeze as much as possible from these price increases on the part of Orlen and the government, which is clearly playing roulette at the moment, may end very negatively.”
“All proposals and warnings sent to the government, led by the PiS candidate for prime minister, Przemysław Czarnek, were ignored. Przemysław Czarnek presented a completed draft proposal that lowers VAT, excise duty, and fuel surcharges. This could be achieved in one fell swoop, but the government failed to do so,” he emphasized.
Szewczak conceded that some proposals are on the table to potentially cut fuel taxes “in the near future,” largely due to outcries from the opposition and everyday Poles.
“The only question is whether the government’s poor organizational efficiency will make it work and be effective, because it does not look like an end to hostilities, but rather a significant escalation in the Persian Gulf region,” he noted.
The former Orlen board member then underlined the importance of the Polish consumer to the economy.
“The vast majority of GDP growth in Poland is based on individual consumption, or simply on Poles’ purchases. If Poles have to pay 9 złoty for fuel, they have to forgo other purchases. This will impact the economy, but also tax revenues. Because what good is it if Orlen’s tax revenue from fuel sales increases significantly this quarter if its VAT, CIT, and PIT revenues decline significantly? Companies that incur huge costs will limit production and conduct mass layoffs,” he explained.
The economist said that “this marks a very serious crisis in public finances this year.”
“In my opinion, the fuel problem will not only translate into lower economic growth but also most likely the need to amend this already huge budget deficit for this year,” he told Do Rzeczy.
The post Fuel crisis in Poland: State-controlled energy giant Orlen’s big profits are being used to plug massive deficit, says economist appeared first on Remix News.
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