Motorists in the Czech Republic should brace themselves for the usual seasonal increase in fuel prices as the peak summer driving season approaches. However, a significant surge in diesel prices is expected later this summer, with an estimated increase of over two Czech crowns per liter. This anticipated surge is a direct result of the planned removal of the reduced consumption tax on diesel, leading to a price hike of 1.80 CZK per liter, including VAT.

The government initially aimed to secure approval for this price increase in the Chamber of Deputies during the initial reading. However, the opposition successfully blocked the proposal, causing a delay in its implementation. Finance Minister Zbyněk Stanjura from the ODS party confirmed that the tax increase will not take effect by July 1 but at a later date.

The exact timing of the diesel price surge will depend on the legislative process and the speed at which members of parliament and senators approve the proposed measures. It is expected that the increase will occur at the beginning of summer, aligning with increased fuel demand during the holiday season.

Štěpán Křeček, Chief Economist at BH Securities, explained that the price surge is in line with the typical pattern observed during the summer months when drivers embark on vacations and fuel demand rises. He predicts that prices could increase by tens of healers per liter.

While the return of the consumption tax to pre-June levels may seem reasonable given the long-term decline in gasoline prices and the state budget deficit, Czech carriers have expressed concerns. Martin Felix, spokesperson for the Czech Association of Road Transport Operators (Česmad Bohemia), highlighted that the sudden increase in the consumption tax will put Czech carriers at a significant disadvantage compared to their counterparts in neighboring countries, such as Poland, Slovakia, and Hungary, who will enjoy a competitive edge due to lower prices.

It is important to note that, according to the Slovenian automobile club AMZS, diesel prices in Hungary are expected to be approximately the same even after the price increase in the Czech Republic. However, prices in Slovakia are likely to remain higher following the diesel price hike in the Czech Republic.

As of Monday, CCS reported that Natural 95 was sold at an average price of 36.60 CZK per liter, while diesel fuel was priced at 31.33 CZK per liter.

The removal of the reduced consumption tax on diesel, which has been in place since 2021, poses a significant change in fuel pricing. It is expected to have implications for consumers, particularly Czech carriers, and may impact competitiveness in the region.

Article by Prague Forum