German fuel tax cut passes on only about two thirds to drivers, DIW finds

A partial pass-through two weeks in

Germany's fuel tax cut took effect on 1 October and runs until 31 December, but two weeks in, economists say only part of the 16.7 cent per litre reduction is reaching drivers. The DIW in Berlin estimates that about two thirds of the cut has reached consumers. It compares pump prices in Germany with those in France, which has no rebate, and treats the difference as the effect of the tax cut. On that basis, prices in Germany have fallen 10 to 11 cents per litre more than in France on average since 1 October. The measure responds to a sharp rise in fuel prices caused by disruption in oil markets linked to the Iran war, and federal and state governments put its cost at 2.5 billion euros.

Where the gap appears

The DIW launched a daily "Tankrabatt-Monitor" in the week of 5 October, tracking pump prices at German filling stations every day. In its first days, the tax cut showed up as a price fall of about 12 cents per litre relative to France, and as much as 13.6 cents for diesel. Since 8 October the average has dropped to 9 cents. DIW competition expert Tomaso Duso said the result depends on the comparison date: using 27 September instead of 30 September pushes pass-through above 80%, yet the fading trend holds either way. He also recalled that pass-through faded during the spring rebate as well, though there only toward its end.

Duso locates the cause in the first stage of the supply chain, where the tax cut arrives first. He urged the Bundeskartellamt to continue its investigations at refinery and wholesale level, arguing that weak competition there is a problem beyond the rebate period.

Whether it is passed on depends on competition at this level.

There are clear indications that competition there is weak.

Ifo, the cartel office and the fuel industry

The Munich-based Ifo institute reports somewhat higher pass-through. For 7 to 13 October it puts the figure at 13 cents for E10 petrol, 14.7 cents for a second petrol grade and 13.5 cents for diesel, all short of the 16.7 cent cut. Sources name that second grade differently: Spiegel calls it E5, while Handelsblatt and Tagesspiegel call it E15. Ifo noted particularly weak pass-through over the weekend of 10 and 11 October.

Bundeskartellamt president Andreas Mundt added that the gap is bigger for petrol than for diesel and that a full assessment is still premature.

The available evaluations suggest that the pass-through has largely, but not completely, taken place at refinery and wholesale level.

The fuel industry association en2x says its members have always passed the rebate on in full. It argues that counter-calculations overlook changes in the costs of the mandatory biofuel quota and of transport, which are currently affected by low Rhine water levels. The industry also points to higher world market prices.

Pump prices and the EU ranking

According to the ADAC, the national daily average for E10 on Wednesday, 14 October, was 2.146 euros per litre. E10 is just over three cents above its price on the first day of the rebate, while diesel, at 2.255 euros, is slightly cheaper than on that day. Both prices have moved only weakly since then. EU Commission data as of Monday, 12 October, shows that with the rebate E10 is the fourth most expensive in the EU, behind Denmark, the Netherlands and Finland, and just ahead of France. Diesel ranks sixth, a few cents behind Belgium and France. At the end of September Germany ranked third for E10 and fourth for diesel, so the rebate has moved it down the table.