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The Warsaw Voice » Other » September 3, 2008
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Gas Prices, Takeovers Up, Diesel Popular
September 3, 2008 By Michal Jeziorski   
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Rising gasoline prices and a string of takeovers of gas stations are key trends on the Polish fuel market. Drivers are increasingly taking to diesel, while the quality of gasoline sold has improved.

The price at the pump is determined by the price of oil, production costs, the degree of competition between producers and distributors, profit margins, and taxes. The price of gas does not necessarily rise in direct proportion with the price of oil. The price of gas would have gone up 150-200 percent if this were the case but a strong zloty and a weak U.S. dollar have been keeping prices in check. Polish consumers, however, have not been spared the indignity of having to dig deeper into their pockets. The price of unleaded 95-octane gasoline, the most popular on the market, went up 6 percent last year. Fuel prices in Poland went up 3.3 percent between May and June this year according to the government's Central Statistical Office (GUS).

Taxes have a huge impact on price. VAT, excise and other taxes account for 57 percent of the price of unleaded 95-octane gasoline in Poland compared with an EU average of 55.8 percent. Mazovia and West Pomerania provinces are the priciest places to fill up, according to a report published by the Polish Oil Industry and Trade Organization (POPiHN). Prices at gas stations belonging to the same chain can vary by as much as zl.0.25 per liter, depending on location, with those in Warsaw (Mazovia province) being the most expensive. And with plans afoot to increase the price by zl.0.28 by making Poland's LPG (liquefied petroleum gas, also known as autogas) excise the highest in the EU, the government does not appear to be about to cut consumers any slack. LPG already became a good deal less popular in Poland last year as the costs of converting and maintaining engines increased. The price of LPG has to be 60 percent or less than that of gasoline for it to be economically worthwhile to convert an engine, according to experts.

Steady as she goes
There were 6,872 filling stations in Poland at the end of last year, compared with 6,861 at the end of June 2006. PKN Orlen is by far Poland's largest gas station owner and has been for years. The company has a network of 1,897 stations, 200 of which operate under the Bliska low-cost brand. Lotos is running a distant second with 379 stations. Next comes the foreign contingent led by BP, Shell and Statoil. Russia's Lukoil is gaining strength here, having taken over Jet in December 2006. Filling stations at hypermarkets are becoming a regular fixture in Poland due to their slightly lower prices. British chain Tesco even guarantees that its fuel prices will be the cheapest within a 3-kilometer radius. Large retail chains curiously failed to capitalize on their increased market share last year, only opening seven new filling stations, compared with 34 the previous year. Low-cost brands like Jet and Bliska are becoming more popular, as are self-service stations like Neste and Statoil's 1-2-3 chain.

Trend for takeovers
Last year was a year of consolidation in Poland. French hypermarket chain Carrefour automatically acquired Hypernova's filling stations when they bought out the Czech chain while Norway's Statoil took over France's Géant stations. Esso, Preem and DEA have been respectively taken over by Lotos, Statoil and Shell over the last few years. This trend is also noticeable among small private operators.

Injecting some diesel
Diesel is becoming increasing popular in Europe, including Poland. Diesel sales hit record figures in 2006 and 2007 and consumption outstripped even the most optimistic forecasts. Poland used just under 10.5 million metric tons of diesel in 2007, a rise of almost 22 percent over the previous year. This has mostly been attributed to Poland's stable economic growth and growing affluence. Diesel engines can now match the driving dynamics of their gasoline cousins while maintaining their greater fuel efficiency.

Polish oil refineries are working at full capacity, producing more than 7.4 metric tons of diesel oil last year. Production capacity may have to be expanded to plug a supply gap. Lotus Group is implementing a program known as 10+ to increase the capacity of its Gdañsk refinery from 6 million metric tons to 10.5 million metric tons annually. In the meantime, imports will have to make good the shortfall.

Quality improves
The good news is that the quality of fuel sold in Poland is getting better, with just a little over 5 percent of random samples failing quality tests. Those selling substandard fuel in Poland are liable to fines of up to zl.1 million or even prison terms of between 3 months and five years. Filling stations are offering better service too, with the largest chains attempting to boost profitability by offering additional services like shops and restaurants.
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