Wednesday, February 28

The State has a lot of room to lower the price of gasoline. In France you already pay 15 cents per liter

If we look at the latest report on fuel prices from the European Commission, the average price of Spanish gasoline stands at 1,680 euros per liter and 1,581 euros for a liter of diesel. But it only takes a few minutes on social networks to find much higher prices, exceeding 2 euros per liter of fuel. What can be done to lessen its impact?

more expensive than ever. The price of fuel is skyrocketing despite the fact that the barrel of Brent has not reached its historical maximum. In fact, after reaching peaks of almost 140 dollars per barrel last week, its price has dropped to the 100 dollar barrier. This is a consequence of taxes and other types of costs that we pay on each liter, such as the profit margin of gas stations and the logistics cost of transport.

a delicate situation. The increase in fuel costs is one of the reasons why inflation has increased. According to the European Commission, the price of gasoline grew nine cents between the last two weekly reports. Diesel, another nine cents a liter. But in places like Extremadura there have been increases of between 15 and 20 cents/liter for gasoline and diesel, respectively. One of the reasons why inflation is already at 7.6%, the highest rise since 1983.

That we pay? Among the measures demanded by these last two associations, the Executive is asked to exceptionally reduce VAT, a special exemption from the Special Tax on Hydrocarbons or a monthly refund of professional diesel. Although it may seem contradictory looking at fuel prices, in Spain we pay 10% less taxes on fuel than two years ago, but the State collects more.

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This is because there is a part of taxes that we pay in proportion to the price of fuel, 21% VAT. But the Excise Tax on hydrocarbons is a fixed amount of 0.432 euros/liter for 98-octane gasoline, 0.401 euros/liter for 95-octane gasoline and 0.307 euros/liter for diesel. This means that the higher the final price, the lower the weight of taxes, having one of the lowest in Europe. 45% of the price of gasoline are taxes and 41% of diesel, too. And down.

Gasoline Tax Map

France will assume the rise. The increase in the price of fuel is not just a matter of Spain. France faces the same problem, although there they pay 53% tax in the case of gasoline and 49% in the case of diesel. And the average price, according to the European Commission, is 1,889 euros for gasoline and 1,883 euros for each liter of diesel. Jean Castex, French Prime Minister, raises this price to two euros per litre.

To alleviate the pressure on drivers and professionals, Castex has announced that the Government will assume a cost of 15 cents for each liter of fuel, whatever it may be. That is to say, the taxes will not be touched because it is considered “an anti-ecological measure” and that it needs the approval of a Law for its implementation. Therefore, for four months (from April 1) the gas stations will apply a discount of 15 cents on fuel to the customer and the State will pay this difference to the service stations. The French government calculates that 2,000 million euros will have to be allocated for this.

Other measures. In addition to France, Portugal will subsidize 40 euro cents for each liter of fuel with a plan called AUTOvoucher. In addition, the increase in the Carbon Tax has been suspended until June 30 and the reduction in the Tax on Petroleum Products is maintained. According to the Portuguese government, for every 50 liter tank, a driver saves 24.25 euros.

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In Poland, the Government has also chosen to lower its taxes, reducing VAT on fuel from 23% to 8%. The same measure has also been taken in Ireland, although here it will be a drop of 20 cents for gasoline taxes, 15 cents for diesel and 2 cents for “green diesel”. Romania, Sweden and Germany are also discussing measures to curb inflation.

Transport in the spotlight. At the end of 2021, the transport sector threatened a strike to improve their conditions. Among other things, it was achieved that they could affect the rise in fuels to the contracts already signed. This measure has been reflected in a Royal Decree-Law published on March 2 in the BOE. However, the Platform for the Defense of the Road Goods Sector is currently on an indefinite strike. The International Road Transport Association (ASTIC) and the Spanish Confederation of Service Station Employers (CEEES) are calling on the Government to lower the taxes associated with fuel, although they have not announced any other type of action.

no concrete news. But what about in Spain? We only know that we know nothing. At the moment, the La Palma agreements, which have served to bring the Autonomous Communities and the Executive closer together, have not given any concrete results. From the Popular Party, Núñez Feijóo has asked the European Union to request a temporary reduction of VAT and the Special Tax on Hydrocarbons that are levied on fuels.

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From the Government, Pedro Sánchez bets on “tax reductions for the sectors affected” by the War in Ukraine, although without specifying anything else. In the same sense, María Jesús Montero, Minister of Finance, has positioned herself. “We are going to study a package of measures, some of them will go through lowering the taxation of some sectors or products that are clearly impacted by the increase in inflation,” Montero pointed out. For its part, Podemos has requested an energy bonus of 300 euros for the most affected families (which they calculate at 19 million) with a cost of 5,700 million euros and Vox will lead a demonstration against the rise in prices on March 19.

Gasoline and diesel are sentenced.  And rotary engines won't save them

What can be done? As is happening in France, putting forward a new Law dealing with diesel and gasoline taxes would lead us to a long debate in which the Senate would also intervene. For this reason, the fastest thing that the Government could apply is a temporary reduction by Royal Decree-Law, as was already done with the reduction of VAT on electricity and its extension. In addition, it must be taken into account that a reduction in fuel taxes could be seen as a measure contrary to the strategy of reducing the consumption of diesel and gasoline that the European Union has undertaken in recent times.

Photo | Paul Zinken/AP

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