The price reduction on petrol and diesel is unjustified and washes additional money into the war chest of Russian ruler Vladimir Putin. This is the conclusion of economists in several countries, who are assessing the political efforts to lower fuel prices at the petrol station.
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In Germany, such a price reduction, according to a decision of the federal government, will take effect on June 1 for three months. A temporary tax reduction on fuel must reduce the price of diesel by 14 øre and petrol by 30 øre per liter. liters. There is also a VAT saving. From the point of view of scientists, this is a rather populist and counterproductive measure.
Fuel consumption in 2020 was the lowest since 1997
Gernot Sieg, director of the Department of Transport Science at the University of Münster, shows in a recent study that fuel prices in Germany are still cheap in a long-term comparison. It is true that looking at the price information on the pumps at the petrol stations leads to disbelief among motorists. However, a long-term view shows that fuel consumption in relation to the net wage for the same route in 2020 was the lowest since 1997.
And even with the current petrol prices of around two euros per liter, the scientist proves that a smaller part of the income is still spent on a tank refill than was the case ten years ago. The level for 2012 would only be reached again at a price of around EUR 2.40. “Nominal fuel price records must be assessed on the basis of their real background,” Sieg writes in his study. “Just as inflation reduces monetary value, productivity gains lead to wage increases. In addition, the technical development makes it possible to use energy-efficient engines in passenger cars. ”
Fuel price reduction at traffic lights: populist and prolongs war
The professor goes into detail: Between 1997 and today, the average net salary of all employees has increased from 1334 euros to 2088 euros. Consumption of the most economical VW Polo has fallen from 6.8 liters per liter. Victory calculator. If you combine the two, the result is that even after the outbreak of the Ukraine war and the consequences for fuel prices, drivers can now travel the same distance for less money than ten years ago.
While Gernot Sieg thus reveals the federal government’s actions as populist, the three Swedish economists Johan Gars, Daniel Spiro and Henrik Wachtmeister come to the conclusion that the tax cuts on fuel even prolong the war. The reason: they flush additional money into the Russian household coffers, which can be used on weapons, ammunition and soldiers.
In the end, Russian oil producers always win
The result of their study in detail: A tax reduction in the EU of 20 cents per. liters would lead to more fuel being pumped up, which would increase Russia’s oil profits by about eleven million euros a day. It results in more than four billion euros a year and thus seven percent of Russian military spending. “Such tax cuts have problematic consequences, as they increase demand and thus make the current supply even tighter,” write the Swedish scientists. In the end, it is always the oil producers who win – as in the case of Russia are state-owned companies. Economists therefore warn of tax cuts on fuel prices in the EU. Her counter-proposal is: Give the people money, at least it will end up in Putin’s war chest.
So does the federal government. As part of their relief package, employees receive an extra 300 euros. If scientists had their will, it would be better not to have decided on the tax breaks on fuel prices.
The article “Traffic lights make fuel cheaper and we give Putin even more money for the war” comes from WirtschaftsKurier.