Analysts expect Czech fuel prices to keep rising, with unpredictability also a problem

Fuel prices are expected to continue rising next week, analysts say. In addition to rising oil prices, market unpredictability is also a problem. This emerged from comments by analysts to CTK. Finlord manager Boris Tomčiak said the average diesel price would exceed 45 crowns per litre next week, and petrol would top 40 crowns.

The average price of diesel in Czechia rose by 2,26 crowns to 43,15 Kč per litre in the week to Wednesday. It is about ten crowns higher than at the end of February, when the war in the Middle East broke out. Natural 95 petrol rose by 1,86 crowns per litre over the week and by almost six crowns since the end of February. Filling stations in the Czech Republic are now selling it for an average of 39,04 Kč/l.

"The global market is still short of 15 percent of the supply of oil and petroleum products, and it is not possible to bring enough additional production online in other countries in the foreseeable future," Tomčiak said.

Brent crude could rise to as much as $130 a barrel by the end of March if the shortage continues, he said. This morning, it was up by more than ten percent, climbing above $119 a barrel. Without the release of strategic reserves and stocks held on tankers, prices would be rising more steeply, according to Tomčiak.

XTB analyst Jiří Tyleček expects prices to continue rising at a similar pace to recent days. "The market is therefore still pricing in a substantial geopolitical premium. This could be partly offset by the release of strategic reserves or a short-term easing of tensions. However, without a return to full operations in the region, the risk of further price rises remains high," Tyleček said.

The conflict in the Middle East, which began in late February with US-Israeli attacks on Iran, has among other things paralysed shipping in the Strait of Hormuz. Around a fifth of the world’s oil and natural gas supplies normally pass through it.

Even if the situation on the market eases somewhat, prices cannot be expected to fall quickly, according to Tyleček, as high input costs and persistent uncertainty will slow any decline.

Malcom Finance chief Jaroslav Ton also cites geopolitical uncertainty, saying the main problem is not the price of oil itself but the loss of market predictability. "A key part of global supply has become geopolitically unreliable," he said.

Traders are adding a risk premium to prices because they cannot be certain that physical deliveries will actually reach the market through the strait, Ton said. Production cuts in the Persian Gulf and insufficient capacity on alternative export routes are contributing to high Brent prices despite some corrections.

Ton said the situation represents a structural shock to the fuel market, changing the rules of transport pricing. Higher fuel prices are the first impact; the second is rising volatility, meaning market fluctuations, a shorter lifespan for pricing calculations and pressure to reprice contracts quickly, he said.

Fixed prices for three months or more are proving increasingly difficult to sustain, he said. Diesel adjustment clauses often fail to protect transport companies’ cash flow. Factoring can help bridge the time gap between costs and revenue, according to Ton.

Trinity Bank economist Lukáš Kovanda noted that in March 2022, shortly after Russia’s invasion of Ukraine began, fuel was more expensive relative to the average net wage. To reach a similar price level, fuel would have to cost about 17,60 Kč/l more than it does now. He recalled that the government of Petr Fiala (ODS) approved a reduction in excise duty after a month and a half.

Toyota Czech Republic CEO Martin Peleška noted that persistently higher fuel prices could change the structure of the market and increase interest in electrified drivetrains, hybrids and plug-in vehicles, which have lower fuel consumption.