The new fuel tax cut is set to take effect as early as October 1, with the Bundestag and Bundesrat expected to approve the reduction this week, a spokesperson for the Federal Ministry of Finance said on Monday. However, it remains unclear when a cap on fuel prices could be introduced. The oil industry has strongly criticised the proposed price cap, warning that it would mean the government was “intervening deeply in the market” and could, in the worst-case scenario, jeopardise security of supply.
The German government announced on Friday evening that it would once again reduce the energy tax on fuels from October. As already happened in May and June, the energy tax on petrol and diesel will be cut by 14 cents per litre until the end of the year. Including the value-added tax charged on the tax reduction, the total fuel discount amounts to 17 cents per litre. The measure is expected to cost €2.5 billion, with the federal government and the states each covering half of the cost.
The new fuel discount will be financed using “unused expenditure funds in 2026,” the Finance Ministry spokesperson said. A windfall tax is also intended to contribute to financing the relief measures. The spokesperson said it should ensure that “the crisis profits made by the oil companies are also used to help finance the relief measures.”
The windfall tax is due to be discussed at the next meeting of EU finance ministers in mid-October. “The Commission is supposed to present a proposal for such a windfall tax there,” the ministry spokesperson said. So far, however, the European Commission has taken no action on the issue. EU Commissioner Valdis Dombrovskis said on Friday only that member states could “already introduce a tax on extraordinary profits at national level if they wish to do so.”
A windfall tax introduced only at national level would put companies in Germany at a disadvantage. Chancellor Friedrich Merz (CDU) has therefore ruled out such a measure.
There is still no clear timetable for introducing the fuel price cap announced by the government. “I cannot give you any firm dates at this point, but of course we want to move forward with the entire implementation process as quickly as possible,” a spokesperson for the Federal Ministry for Economic Affairs said. The government said on Friday that its aim was to introduce the price cap “by January 1, 2027 at the latest.” Luxembourg and Belgium are being considered as models for the measure.
The federal government plans to hold talks with the oil industry over the fuel price cap. “Security of supply must be guaranteed. Abusive price increases must be prevented,” the government stressed. The Fuels and Energy Association (en2x), however, said on Monday that the smaller markets of Belgium and Luxembourg, which are supplied from Belgium and the Netherlands, were not suitable models for Germany.
The German market is “highly complex” because supply conditions vary significantly from one region to another, resulting in substantial price differences at certain times, the association said. This is due both to logistics chains and to the locations of local refineries, as well as Germany’s 14,000 petrol stations. “A uniform state regulation of prices for the entire country is therefore not an appropriate solution and would involve considerable additional bureaucracy,” en2x said.
As the Federal Ministry for Economic Affairs warned last week, the industry association also cautioned that setting the price cap too low could, in the worst-case scenario, jeopardise security of supply. The reason, according to en2x, is that fuel could flow to markets where buyers are willing to pay more if prices in Germany were capped too low.
The association stressed that fuel prices in Luxembourg and Belgium were lower because of their lower government charges, “not because of government intervention in the market.”
The high prices at petrol stations are a “global phenomenon,” the association reiterated.As a result of the crisis in the Middle East and Russia’s war against Ukraine, significant refinery capacity is currently unavailable to the global market, en2x said. Countries around the world are competing for the reduced supply. “The increased prices for fuels are a direct consequence of this market situation,” the association said.
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