BERLIN — Germany will cut taxes on gasoline and diesel by €0.17 per liter starting October 1, the government announced Friday, offering relief to consumers and businesses as fuel prices hit record levels.
The tax reduction includes a €0.14 cut in the energy tax and a reduction in value-added tax, totaling €0.17 per liter. The measure will remain in place through the end of the year and cost the government €2.5 billion in foregone revenue.
The decision follows a sharp rise in fuel costs across Germany. Earlier this week, the nationwide daily average price for a liter of E10 gasoline reached €2.286, a record high. Benchmark oil prices have climbed above $100 a barrel, driven in part by the ongoing conflict in Iran.
Chancellor Friedrich Merz said the tax cut addresses pressure on consumers who depend on their vehicles daily. "Anyone who relies on their car every day is reaching their breaking point," Merz said in a statement.
Fuel prices have become a political liability for Merz, whose approval ratings have recently fallen to record lows. The tax cut precedes regional elections Sunday in Berlin and the northeastern state of Mecklenburg-Western Pomerania, a largely rural region where residents depend heavily on personal vehicles.
Manuela Schwesig, the incumbent state premier in Mecklenburg-Western Pomerania, had criticized the federal government's response and advocated for a fuel price cap modeled on Luxembourg's system.
The German government also announced plans to negotiate a fuel price cap with the oil industry by January 1, 2027, at the latest, following models in Luxembourg and Belgium.
Greenpeace and opposition parties criticized the tax reduction as untargeted and climate-harmful, arguing much of the relief would translate into excess profits for oil companies.
Germany implemented a similar temporary energy tax reduction from May through June that lowered fuel prices by approximately 17 cents per liter and cost €1.6 billion. That measure prompted widespread calls for an extension.
Merz's conservative CDU party and their Social Democrat coalition partners agreed on the funding arrangement after negotiations between the federal and state governments.
