14 Jun 22

European governments intervene to lower pump prices

Fleet budgets are coming under extraordinary pressure as the pump prices of petrol [gasoline] and diesel hit record heights across Europe, forcing national governments to cut duty and taxes.

The psychological threshold of €2 per litre [$7.57 per gallon] or €100 per tank refill is in sight and has even been surpassed in some EU countries. Nor is there any sign of a reprieve, with oil prices forecast to remain high due to a shortage of supply following the sanctions placed on Russian exports as a consequence of the invasion of Ukraine.

Government intervention

This has pushed national governments to intervene to reduce fuel costs, although reductions in tax and duty are failing to make much of an impact at the pump. The UK reduced fuel duty by a modest £0.05 per litre in March, followed by a more generous €0.15 per litre cut in France and €0.17 per litre reduction on petrol and €0.11 cents per litre for diesel in the Netherlands from April 1. In Spain, the Government paid for a €0.15 per litre cut, with fuel companies delivering a further €0.05 reduction. Then on June 1, the German Government axed duty levels by €0.35 per litre, while the Swedish government announced that tax on diesel and petrol will be temporarily reduced from June to October 2022, cutting just over SEK 1.30 per litre in addition to a tax reduction of SEK 0.50 that was introduced in May. 

However, with no sign of any fall in oil prices – the Brent Crude benchmark is trading at  $124.5 per barrel, compared to $70.4 last year – and analysts such as Goldman Sachs forecasting prices will rise to $135 per barrel in the second half of 2022 and first half of 2023, fleets face long-term pain at the pumps.

This is a politically charged situation; in 2018 France was brought to a standstill by the ‘gilets jaunes’ (yellow vests) protesting against a planned rise in the tax on petrol and diesel, and this week the German Government has moved to tighten its anti-trust laws amid public criticism that barely one third of its fuel duty reduction had been passed on at the pumps.

Fuel tourism

In the meantime, car, van and truck drivers who live close to borders are undertaking ‘fuel tourism’ trips to fill up their vehicles in cheaper countries; Dutch drivers are crossing the border to refuel in Germany, for example, and German drivers are refuelling in Poland.

This cross-border trade highlights the high duty and tax levels levied on fuel and the uneven approach adopted across European Union member states.

The higher fuel prices also accelerate the tipping point when the total cost of ownership of electric vehicles becomes cheaper than their internal combustion engine equivalents, although the penetration of electric light commercial vehicles remains so low that van fleets are having to take the fuel price rises on the chin while implementing policies designed to improve fuel economy and cut consumption.


Authored by: Jonathan Manning