Gas station operators did not fully pass on Germany’s 2022 fuel rebates to customers – analysis

The German government’s reduction of energy taxes on fuels between June and August 2022 to soften the impact of rising prices due to the energy crisis has not been fully passed on to customers, an analysis conducted by economic research institute RWI has found. The controversial fuel rebate that reduced the price for diesel fuel by about 14 cents per litre and for gasoline by 29.5 cents per litre initially was almost entirely reflected in prices at gas stations, but the effect significantly waned in the following two months, while also showing strong regional differences, the RWI found by comparing price levels in Germany and France during this period. “In the first month, the rebate was passed on almost entirely. But this was less and less the case afterwards,” RWI researcher Manuel Frondel said.

One reason why prices were higher again in July are external factors, such as low water levels in the river Rhine due to low rainfall, which impacted vessel-based fuel transports and therefore fuel prices. However, the RWI analysis also found that the rebate was lower in regions with a higher average income and at gas stations that do not have nearby competitors, suggesting that individual price setting decisions by gas station operators played a role in how much customers could benefit from the government’s decision to reduce taxes. At gas stations without nearby competitors, only about 84 percent of the diesel rebate and 80 percent of the rebate for E10 gasoline were passed on. On average across the country, customers benefitted of 87 percent of the rebate for diesel and of 71 percent for E10 gasoline. “Besides the effects of the drought period, the receding media interest could be an explanation for this development,” Frondel said. However, the fact that gas stations with little competition significantly deviated from the average price level suggested that the operators’ decisions on how much to charge customers played a role too, he argued.

The fuel discount, an initiative championed by finance minister Christian Lindner from the pro-business Free Democrats (FDP) was a contentious measure even at the height of the energy crisis, when the government sought to address the rapid increase many citizens were facing with respect to their energy costs. Many researchers and NGOs voiced their opposition, arguing the measure would encourage greater use of fossil fuels, disproportionately benefit mid to high-income consumers and enables oil companies to make windfall profits.