Traffic light coalition in a dilemma: fuel prices are falling - are billions being spent on nonsensical subsidies?

Created: 04/19/2022, 17:33

By: Markus Hofstetter

The federal government wants to spend billions to relieve drivers at the petrol pumps.

But the prices for petrol and diesel are already falling noticeably.

Is the money wasted?

Berlin – As a result of the Ukraine conflict*, the prices for petrol and diesel rose to unprecedented heights in March.

Commuters and businesses groaned under the additional costs.

The federal government sees itself as a savior in need and wants to give the citizens a strong helping hand, even if this is controversial within the coalition*.

The relief package decided by the traffic light coalition at the beginning of April provides for a three-month reduction in energy tax from June.

This should reduce the price of petrol by 30 cents per liter and the price of diesel by 14 cents per liter.

The state currently levies taxes and duties of 87 cents per liter on diesel, but 1.04 euros on Super E10.

According to a draft by the Ministry of Finance, this should cost the state 3.15 billion euros.

The reason for the late entry into force of the measure is that the energy tax can only be reduced with a change in the law that has to be approved by the Bundestag and Bundesrat.

Ukraine war and the price of gas: The real world is faster than politics

But politics is being overtaken by reality, and fuel prices are already falling again.

On April 13, the ADAC reported that prices at Germany's gas stations had fallen significantly compared to the previous week.

A liter of petrol cost 1.94 euros on average nationwide, 4.6 cents less than in the previous week.

The diesel price even fell by 8.3 cents and was 1.96 euros.

There are no more recent figures, but it should continue like this.

The ADAC fuel market expert Jürgen Albrecht expects a further gradual normalization after the extreme values ​​in mid-March in view of falling crude oil prices and supply flows becoming more stable again.

Accordingly, fuel prices, including some countermovements, should slowly fall towards the values ​​of early March.

From early to mid-March, the Super E10 had risen from 1.83 euros to 2.20 euros, and the price of diesel had even jumped from 1.76 euros to 2.32 euros.

From June, the government is planning to relieve drivers of a total of over three billion euros © IlluPics/imago

War in Ukraine and the price of gas: reversing the reduction in energy tax is almost impossible

The federal government is now in a dilemma.

If the prices for diesel and petrol level off at around the level at the beginning of March in the following months, drivers would only have to pay 1.53 euros per liter of petrol at the pump from June.

With diesel it would be 1.63 euros per liter.

So it is quite possible that the governing coalition spends billions on a subsidy that is actually no longer necessary.

On the other hand, it is difficult to collect the measure again, since it would seem like a broken promise that could alienate the citizens.

Ukraine war and the price of gas: tax cuts should only support the needy

, the economist Monika Schnitzer from the Ludwig-Maximilians-University in Munich

believes that lowering the energy tax makes sense in view of the falling oil prices.

On the one hand, the tax cut is ecologically questionable because it "reduces the incentive to save fuel," says the economist, who also advises the federal government as an "economist".

And on the other hand, the measure is “not accurate because all drivers benefit from it, even those who can basically afford higher prices.” According to Schnitzer, the burden of the increased energy prices should be distributed in such a way that the needy part of the population in particular supports them will.

"But we cannot relieve everyone."

Ukraine war and the price of fuel: Oil companies could not pass on tax reduction completely

But Schnitzer also fears that the mineral oil companies in particular will benefit from the tax cut.

According to the economist, it is to be expected that the savings will not be passed on in full at the pump.

An initial study by Schnitzer on the 2020 VAT reduction had shown that only 60 percent of the tax reduction had been passed on to consumers at gas stations - and only with a delay.