German Gasoline Tax Cut to Lower Price 17 Cents

The German government has agreed to cut taxes in a move expected to lower the price of gasoline by €0.17 ($0.19) per liter, sources familiar with the decision told Reuters.

The measure combines a €0.14 ($0.16) reduction in the energy tax with a further €0.03 ($0.03) from an adjustment to value-added tax. The agreement followed protracted negotiations between the federal government and the individual states over how to finance the revenue shortfall.

Chancellor Friedrich Merz promised this week to help consumers affected by the sharp rise in fuel prices. The war with Iran has pushed benchmark oil prices above $100 per barrel. The nationwide average price of a liter of E10 gasoline reached a record €2.286 ($2.62) at the start of the week.

High fuel prices have become an urgent political issue for Merz, compounded by his government's record-low approval ratings. Elections are scheduled for Sunday in Berlin and Mecklenburg-Western Pomerania, where his Christian Democratic Union could suffer significant losses.

The government had already cut the energy tax temporarily from May through June, making gasoline and diesel about €0.17 ($0.19) cheaper. According to the daily Bild, it is also preparing a gasoline price cap that would be linked to the oil price.

(Reuters, luc)