Germany cuts tax on petrol and diesel: Will it bring cheaper fuel?

Germany is temporarily cutting taxes on petrol and diesel from 1 May in response to a sharp rise in fuel prices caused by geopolitical tensions and disruption to global oil supplies. The government wants to ease pressure on consumers and the economy, but the measure’s actual impact on prices and demand remains uncertain. The outcome will depend not only on distributors’ behaviour, but also on how the conflict in the Middle East develops and on wholesale market trends,  reports SP Platts Global.

Tax relief aims to cool record prices

The German government is cutting energy tax on diesel and petrol by 14,04 euro cents per litre from 1 May to 30 June. The measure comes as fuel prices have reached new highs following disruption to global oil supplies caused by the war between the US and Iran. According to European Commission data from late April, diesel in Germany was priced at around 2,18 euros per litre, while Super 95 petrol cost approximately 2,14 euros per litre. Compared with February, diesel had become about 15 cents more expensive per litre, while petrol prices remained relatively stable over the period.

A tax cut does not in itself mean that prices at petrol stations will fall by the same amount. Energy tax accounts for only one part of the final fuel price, so it is unclear how much of the reduction will reach consumers. Analysts say the key factors will be how much distributors and petrol station operators actually pass the change on through lower prices, and how quickly any price cuts feed through to demand.

The diesel market awaits a recovery in demand

The market’s initial response remains cautious. Fuel traders have not yet seen a significant increase in demand immediately after the tax cut, particularly for diesel. They say the trend will become clearer after some time, with the coming days showing whether the tax relief actually affects customers’ purchasing behaviour.

A possible increase in demand could provide some relief to the European diesel market, which weakened in March and April amid record-high prices. Those prices attracted supplies to Europe from the US, West Africa and the Red Sea region. At the same time, a fall in Brent crude prices temporarily improved refining margins, although their future direction remains uncertain. Many refineries are processing high-priced crude, which is still limiting their profitability.

Petrol is expected to respond less strongly to the tax change than diesel. The European market is relatively well supplied, and the switch to summer fuel specifications has not yet caused significant strain. Stocks in the Amsterdam–Rotterdam–Antwerp area have fallen slightly from their winter highs, but remain at levels that are preventing sharper price increases.

Czech Republic: government turns to broader regulation

The Czech Republic has taken a much more direct and regulatory approach to rising fuel prices than Germany. In response to the geopolitical price shock, the government temporarily cut excise duty on diesel in early April and also introduced regulation of petrol station margins, along with a system for setting maximum petrol and diesel prices each day. These exceptional measures were subsequently extended until 31 May 2026, while the cabinet also adjusted the methodology for calculating the price cap to better dampen sharp daily fluctuations in wholesale prices.

The government says the combination of tax relief, price regulation and increased oversight is intended to prevent the tax cut from being absorbed into margins and to ensure market stability and fuel availability. At the same time, it stresses that this is a temporary measure, whose duration depends on further developments in the security situation and supplies.

While Germany is responding to the price shock primarily through tax relief, the Czech Republic has opted for a combination of tax measures and direct regulation of retail prices.