Recent dip in gasoline prices not likely to continue, analysts say
Despite oil and gas monopolist Polski Koncern Naftowy's (PKN) two recent 1% decreases in gasoline prices, analysts said last week they didn't think the reductions would become a trend on the market.
Domestic prices of crude oil fell in the middle of March after Organization of Petroleum Exporting Countries (OPEC) summit members agreed to increase production. But whether prices at Polish pumps will continue to drop remains to be seen. Since March, the price of a barrel of crude oil has fallen from $30 to $21-$22 per barrel.
"There is no one price" on such commodities, said Michal Mierzwa, a regional oil and gas analyst at Creditanstalt Securities. "I don't expect that prices will be as low as one year ago." At the end of 1998, a liter of unleaded gasoline cost zl. 1.80. Today, it goes for about zl. 3.
PKN, the country's largest refiner and distributor of petroleum products, has been adjusting its prices to keep pace with the rest of Europe. But because of its dominant market position the company may not always respond quickly to market changes, said Pawel Zach, an analyst with Citibank (Poland).
"The scale of the reductions is lower than the crude oil price would indicate," Zach said.
One place where this is likely to be seen is at the gasoline pump.
"The company realizes an additional premium, which is obviously better for the company's profits," said Krzysztof Urban, an analyst with Wood & Co.
Analysts also remarked that there is no direct interdependency between crude oil and gasoline prices. While crude oil prices may be one factor at the pump, the price also includes how gas prices are set in Europe as well as transport and storage costs.
Krzysztof Rybinski, chief economist at ING Barings, was pessimistic about the likelihood of prices decreasing noticeably at the gas pump. He attributed this to PKN's monopolist position in the market, with about a 70% market share.
"Certainly as such, it (PKN) does not have to respond as vigorously to changes," he said.
Rybinski also said that projected excise tax increases could even result in price hikes. In 1999, the excise tax on gasoline increased by 30%. In 2000, excise taxes on gasoline are projected to increase by 16%.
Last week's volatile zloty also shouldn't help to bring down gas prices.
"We will probably see a stabilization or a slight increase (of gasoline prices)," Rybinski said. "I would certainly doubt that there would be any further decrease in oil prices due to the zloty weakness."
