Romania's lower house of parliament adopted a bill on Wednesday that gives the government new powers to intervene in the fuel market, including a temporary reduction in the excise duty on diesel, a lower VAT rate for petrol and diesel, and restrictions on exports. The law, passed with 293 votes in favour and two abstentions, will now go to President Nicușor Dan for promulgation and takes effect after publication in the Official Gazette. It was championed by the Social Democratic Party (PSD) as a way to shield households and businesses from high pump prices.

What the law can do

The legislation allows authorities to declare a state of crisis in the oil and petroleum products market when certain triggers are met. A crisis can be announced in the event of armed conflicts, international sanctions, supply-chain disruptions or other exceptional events. The specific thresholds include a rise of at least 20 percent in the Brent crude oil quotation or in the average pump price for petrol and diesel, as well as a risk of interruption to domestic supply. Once activated, the government gains a set of temporary tools.

The central measure is a mechanism that reduces the excise duty on standard diesel sold on the Romanian market. The cut is set gradually, between 5 and 25 percent, depending on the evolution of Platts diesel quotations and the average pump price. The Ministry of Finance will analyse the market indicators twice a month using data supplied by the Competition Council and will fix the reduction level for the following two-week period. The mechanism can be applied for one or several successive two-week windows, without exceeding the overall crisis period.

In addition to the excise reduction, the law permits the VAT rate for petrol and diesel to be cut to 19 percent in the refining, wholesale and retail segments. A solidarity contribution is imposed on revenues obtained from trading crude oil and energy products derived from Romanian-extracted crude. Exporters of diesel must obtain prior consent from the Economy Ministry and the Energy Ministry for any exports or intra-community deliveries while the crisis status is in force. Economic operators may also temporarily lower the biofuel content in petrol from the current 8 percent to a minimum of 2 percent during the application of the protective measures.

Why parliament acted

PSD deputy Bogdan Ivan, who announced the vote, said the bill should bring down the final price for private consumers and for companies. He noted that although the barrel of oil had fallen from $105 to $78, diesel had risen from 9 to 10 lei per litre, and accused the former government of failing to intervene in the market.

“A very important bill has just been voted on: the declaration of a state of crisis in the fuels sector, the reduction of the excise duty on diesel, the limitation of diesel exports, the limitation of commercial mark-ups and the surtaxation of windfall profits in fuels. This should lead to a reduction in the final price for private consumers as well as for companies in our country.”

Standard diesel currently costs over 10 lei per litre. The new law provides a legal framework for market interventions that, according to its supporters, have been absent despite the divergence between falling crude prices and rising retail fuel costs.

What happens next

The adopted text now awaits the signature of President Nicușor Dan. Once promulgated and published, the law enters into force. Operational details, including the exact level of excise reduction at any given moment, will depend on bi-monthly reviews of Platts quotes and average pump prices. Market participants will be required to report monthly on their prices and on their compliance with the law, and any exports of diesel will need explicit approval from the relevant ministries throughout any declared crisis period.