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DRIVING

Has Germany’s fuel tax cut failed?

Despite an initial price drop after a fuel tax cut, drivers in Germany have barely seen any change in prices at the petrol pump. But Finance Minister Christian Lindner says the move isn't a failure.

Fuel prices Germany
Prices for petrol jump up to more than two euros just a week after the fuel tax discount comes into force. Photo: picture alliance/dpa | Oliver Berg

As part of its energy relief package, the German government slashed taxes on both petrol and diesel for the months of June, July an August.

The move to reduce energy tax to the EU minimum was designed to offer car drivers a better deal over summer. On the first day of the tax cut, prices at the pumps dropped significantly, but then shot back up to over €2 per litre within days.

As of Sunday, drivers were paying as much as €2.10 for a litre of diesel and €2.04 for a litre of Super E10, according to internet portal benzinpreis.de

Consumers have responded with outrage at the fact that the some 35 cents of savings on a litre of petrol and 17 cents on a litre of diesel appear to have been pocketed by the petrol companies, while fuel prices remain as high as ever. 

Speaking to RBB on Friday, Marcel Fratzscher, head of the German Institute for Economic Research (DIW), branded the government’s move a “failure”. 

“The fuel rebate has failed – and it had to fail,” he said. “This type of tax cut can only work if there really is competition.” 

READ ALSO: Why are fuel prices soaring in Germany this week?

The tax cut was also slammed by Green Party leader Ricarda Lang, who said she had “no interest in seeing the mineral oil companies make big profits”. 

But Finance Minister Christian Lindner (FDP) – who spearheaded the so-called ‘fuel discount’ – defended the scheme while doing the rounds of Sunday night talkshows on ARD and ZDF. 

He claimed that the energy tax cut had been passed onto car owners by petrol firms, and argued that the price of fuel would be “much higher” if the government hadn’t stepped in. 

‘Disappointment and anger’

Though the Finance Minister has made it clear that the benefits of the low tax rate are meant to be felt by consumers, there’s no specific law that states that the mineral oil companies have to pass on the excess profits.

Instead, Lindner has said he expects the Cartel Office to monitor the pricing of the petrol firms and step in if they suspect foul play – though other ministers argue that it doesn’t have the power to do so.

“I hope that all those who have demanded that the Cartel Office intervene are also prepared to put it in a position to be able to intervene,” Economics Minister Robert Habeck (Greens) said on Monday.

“This doesn’t apply to the fuel discount now, but it sharpens the swords for the future and sends a clear signal that getting rich at the expense of others doesn’t work that easily.”

Nevertheless, he said: “I understand the disappointment and anger of consumers when corporations simply pocket as profit the tax cut that was intended as a relief for commuters.”

READ ALSO: Who benefits the most – and least – from Germany’s energy relief measures?

Currently, the Cartel Office is charged with monitoring antitrust and competition laws in Germany. It does not, however, have the power to step in when a company makes additional profit from a tax cut aimed at the sector – unless that company is proven to be acting as part of a cartel. 

However, the fact that sectors like the energy and fuel sector have raked in enormous profits since the outbreak of the Ukraine war has led to a debate over a potential tax on ‘excess profits’ and a reform of the Cartel Office’s powers.

Economics Minister Robert Habeck

Economics Minister Robert Habeck (Greens) speaks at the East German Business Forum in Brandenburg. Photo: picture alliance/dpa | Patrick Pleul

The latter is the task of the Economics Ministry’s Robert Habeck, who recently announced that a proposal for reform was on its way. 

“We are making antitrust law with claws and teeth,” he told Deutschlandfunk on Monday. 

According to Green Party politician, the Cartel Office should have greater powers to intervene and even break up large companies if companies are found to be abusing their market power.

Habeck also said he was committed to introducing pitched a tax on company’s excess profits during the war, but admitted that this was unlikely to be supported by the pro-business FDP. 

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ENERGY

Should tenants in Germany be shielded from energy price hikes?

Gas prices have more than tripled in the past year, prompting tenants' rights advocates to call for more social support and a cap on energy costs.

Should tenants in Germany be shielded from energy price hikes?

The German’s Tenants’ Association is calling on the government to put together a new energy relief package to help renters deal with spiralling energy costs.

Gas has become an increasing scarce resource in Germany, with the Economics Ministry raising the alert level recently after Russia docked supplies by 60 percent.

The continued supply issues have caused prices to skyrocket. According to the German import prices published on Thursday, natural gas was three times as expensive in May 2022 as it was in May a year ago.

In light of the exploding prices, the German Tenants’ Association is putting the government under pressure to offer greater relief for renters.

READ ALSO: 

Proposals on the table include a moratorium on terminating tenancy agreements and a permanent heating cost subsidy for all low-income households.

The Tenants’ Association has argued that nobody should face eviction for being unable to cope with soaring bills and is urging the government to adjust housing benefits in line with the higher prices. 

Gas price cap

Renters’ advocates have also joined a chorus of people advocating for a cap on consumer gas prices to prevent costs from rising indefinitely.

Recently, Frank Bsirske, a member of the parliamentary Green Party and former head of the trade union Verdi, spoke out in favour of capping prices. Bavaria’s economics minister and Lower Saxony’s energy minister have also advocated for a gas price cap in the past. 

According to the tenants’ association, the vast majority of tenants use gas for heating and are directly affected by recent price increases.

At the G7 summit in Bavaria this week, leaders of the developed nations discussed plans for a coordinated cut in oil prices to prevent Russia from reaping the rewards of the energy crisis. 

In an initiative spearheaded by the US, the group of rich nations agreed to task ministers will developing a proposal that would see consumer countries refusing to pay more than a set price for oil imports from Russia.

READ ALSO: Germany and G7 to ‘develop a price cap’ on Russian oil

A gas price cap would likely be carried out on a more national level, with the government regulating how much of their costs energy companies can pass onto consumers. 

Strict contract laws preventing sudden price hikes mean that tenants in Germany are unlikely to feel the full force of the rising gas prices this year

However, the Tenant’s Association pointed out that, if there is a significant reduction in gas imports, the Federal Network Agency could activate an emergency clause known as the price adjustment clause.

This would allow gas suppliers to pass on higher prices to their customers at short notice. 

The Tenants’ Association has warned that the consequences of an immediate market price adjustment, if it happens, should be legally regulated and socially cushioned.

In the case of the price adjustment clause being activated, the government would have to regulate the costs that companies were allowed to pass onto consumers to prevent social upheaval. 

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