Germany's coalition lets fuel tax rebate expire on 30 June, warns oil firms against price hikes

The decision

Germany's governing coalition of CDU/CSU and SPD will let the temporary fuel tax rebate expire at the end of June, the parliamentary groups confirmed on Wednesday. The measure, which reduced the energy tax on petrol and diesel by 14.04 cents per litre (roughly 16.7 cents including the VAT effect), has been in force since 1 May and was always limited to two months. The state has forgone an estimated €1.6 billion in revenue.

We decided after long consultations to let the fuel rebate expire as planned on 30 June.

It does not make fiscal sense. In the current situation we cannot afford to take on debt for it.

Why it was introduced

The rebate was enacted after fuel prices surged following the outbreak of the Iran war on 28 February. According to ADAC data, the nationwide average price for a litre of Super E10 fell from €2.109 in April to €1.983 in May, a drop of nearly 13 cents. Diesel fell more sharply, from April to May, by 27 cents to €1.991 per litre.

The warning to oil companies

Both deputy parliamentary group leaders warned mineral oil companies against significant price increases once the rebate ends. The coalition is prepared to stop a possible price explosion, they said. "If the situation changes dramatically from 1 July, we can react quickly," Müller and Zorn stated, adding that this applies even during the summer recess. The Bundestag could be convened for special sessions, and they expect the Bundesrat to cooperate.

Contingency measures under discussion

Several relief options are being discussed should fuel prices spike again: targeted subsidies for low-income drivers, a higher commuter allowance, a lower energy tax, a reduction in the electricity tax for all, a fuel price cap, and a windfall tax on oil companies. No specific price threshold that would trigger action was named. Müller also announced that competition law would be tightened further to "clean up the market and create more transparency."

Competition law will be tightened further.

Criticism from economists

The Munich-based Ifo Institute for Economic Research found that the rebate largely reached consumers, with an average pass-through of 12 cents for diesel, 16 cents for Super E5, and 15 cents for Super E10 in May. However, a portion of the tax relief remained with the oil companies. Ifo deputy head Florian Neumeier argued against an extension, calling instead for targeted measures such as income tax reform to relieve low-income households. The institute noted the rebate primarily benefits frequent drivers and owners of high-consumption vehicles, and runs counter to climate policy goals for reducing transport emissions.

The federal government should not extend the fuel rebate beyond June.

A spokesperson for the Fuels and Energy trade association told the Rheinische Post that filling stations had passed on the full tax reduction from the start and would continue to do so until the measure expires.

What happens on 1 July

From 1 July, the energy tax on petrol and diesel returns to its previous level. How pump prices develop will depend on both the tax restoration and the trajectory of global oil prices. The coalition has not committed to any single backstop measure but insists it can convene parliament rapidly if needed.