Critics blast government relief package as fossil fuel prices stabilise

The German government’s planned relief package to shield consumers from rising energy costs exacerbated by Russia’s war against Ukraine is facing increasing criticism partly due to already declining fossil fuel prices, Tagesspiegel Background reports. A barrel of oil is now selling for less than 100 US dollars and petrol and diesel prices have fallen below the 2-euro mark – currently 1.995 euros for diesel on average and far below the mid-March diesel high of 2.30 euros in Germany. The government's plan to lower taxes on these fuels for three months could mean diesel and petrol will be cheaper than before the war, writes Tagesspiegel. Jürgen Albrecht, fuel expert at the ADAC German automobile association, expects a gradual price normalisation as supply flows stabilise.

The government’s plan, which is set to begin in June, will not only lower energy tax on fuels to the European minimum, but also introduce a 300-euro tax bonus for employed persons and offer 9-euro-per-month public transport tickets for 90 days. As European Union member states debate a possible oil embargo on Russia, it is unclear how prices will develop in the coming months. With currently falling prices, however, critics are asking to what extent lowering diesel and petrol prices is still necessary.

Government measures to lower prices “keep Germany dependent on Russia,” according to economist Veronika Grimm. The measures could also cost the government 3.15 billion euros in lost tax revenue, Tagesspiegel Background notes. In addition, they send the wrong signal "that fossil fuels will definitely remain affordable" and do not promote any change in mobility behaviour, said Wiebke Zimmer from think tank Agora Verkehrswende. Instead, Zimmer calls for an immediate programme to lower energy consumption in transport in order to reduce dependence on Russia and counteract climate change. A speed limit is one option under consideration.

At the same time however, transport companies say the measures do not go far enough to help alleviate their plight. The Association of German Transport Companies (VDV) is demanding an additional 1.5 billion euros in federal funds to compensate for the consequences of the war on public transport operators. Bus and trucking companies are worried about their existence and are also calling for liquidity support.