Key facts
- Czech government to cap gasoline and diesel prices from October 1.
- Refiners to be taxed on 50% of margin increases over 2025 levels.
- Diesel excise tax to be reduced to the EU floor through October.
- Windfall tax requires parliamentary approval and applies to companies with revenue over 2 billion crowns.
- Orlen, which operates Czech refineries, is expected to be the primary target of the windfall tax.
- Refining margins at Orlen and MOL reached $50-$55 a barrel in September, up from $15-$20 historically.
The Czech government announced on Monday that it will reinstate price caps on gasoline and diesel starting October 1, and will also implement a tax on refiners for 50% of any margin increase above 2025 levels. This move comes as global supply chain pressures, including Saudi Arabia's reduced crude allocations to Europe and disruptions in the Strait of Hormuz and Bab-el-Mandeb strait, are driving up fuel prices.
The price cap will set maximum daily prices for gasoline and diesel, calculated based on a three-day rolling average of benchmarks from Orlen Unipetrol, MOL, ?EPRO, and Platts quotations, plus a regulated margin of 2.50 crowns per liter ($0.12). Additionally, the diesel excise tax will be lowered from 9.95 to 8.011 crowns per liter, the European Union's minimum, through October. Finance Minister Alena Schillerová estimated the cost of these measures to the state budget at 1.1 billion crowns (approximately $51.9 million) for the month.
The proposed windfall tax, which requires parliamentary approval, will target companies processing crude oil with annual revenues exceeding 2 billion crowns. This threshold is expected to primarily affect Poland's Orlen, which operates both of the Czech Republic's refineries. The levy, intended to remain in effect through 2027, is projected to raise an estimated $260 million annually and is designed to help finance the costs incurred by consumers and public budgets due to the energy crisis. Poland had previously introduced a similar tax on Orlen's domestic refining margins.
According to economist Lukáš Kovanda, citing UBS data, refining margins at Orlen and MOL, key suppliers to the Czech market, reached $50 to $55 a barrel in September, a significant increase from the historical range of $15 to $20. While the Czech Republic imported only about 7% of its pre-war oil via the Strait of Hormuz, refined fuel prices on interconnected European markets rose due to tightening refining capacity and competition for limited crude supplies. Houthi forces recently seized the port of Mokha and Perim Island in the Bab-el-Mandeb strait, disrupting Red Sea routes. This, combined with damage to Saudi Arabia's East-West pipeline, has constrained supply routes, forcing European refiners to compete for available crude and pushing margins higher even for facilities not directly experiencing oil shortages. Saudi Aramco has informed its European term-contract buyers that they will receive no October crude allocations, redirecting approximately 1 million to 1.5 million barrels per day of Gulf exports to Asian buyers. Poland's Orlen was reportedly already seeking alternative crude sources prior to this announcement.
Czech gasoline prices reached 44.22 crowns per liter and diesel 47.79 crowns per liter on September 9, marking the highest gasoline prices since August 2022 and the highest diesel prices since April 2026. Several other European countries, including Germany, Spain, Portugal, Italy, and Austria, have requested that the Irish EU presidency add a windfall tax on refiners to the agenda for the September Ecofin meeting in Dublin.