(de-news.net) – German Economy Minister Katherina Reiche (CDU) is advocating for targeted direct payments, potential energy-tax reductions, and a reexamination of the commuter tax allowance as solutions to Germany’s ongoing high fuel prices. Anke Rehlinger of Saarland is advocating for a windfall tax on oil companies and a fuel price cap. On the other hand, economist Manuel Frondel cautions that price controls could lead to shortages and reduce competition. As fuel and heating oil markets continue to be constrained by geopolitical tensions and decreased refining capacity, the energy sector anticipates that market conditions will only gradually return to normal, possibly lasting until 2027.
Reiche is standing by her proposal to use a direct-payment mechanism to provide targeted relief as fuel prices remain exceptionally high. Reiche considers the system a potentially rapid means of assisting lower-income groups, particularly households that pay little or no income tax. Implementation would fall under the responsibility of the Finance Ministry, placing the proposal within the broader policy dispute over how the government should respond to the continuing increase in fuel costs. Reiche and Finance Minister Lars Klingbeil (SPD) have previously clashed over both the proposal and the wider question of which measures would provide the most appropriate relief.
The Federal Government has also returned repeatedly to the commuter tax allowance as a possible instrument for easing the financial pressure on households. Although its effects would not be immediate, Reiche argues that the measure could reduce the overall burden faced by commuters over the course of a year. Her ministry had already presented a broader package of measures at the beginning of the crisis, and she intends to bring those proposals back into the coalition’s current deliberations. The debate therefore extends beyond a single relief measure, with policymakers considering how different instruments might complement one another.
Reiche also wants to examine whether selected energy taxes could be reduced. In her view, the focus should extend to the various charges that contribute to energy costs, while policymakers should avoid imposing additional burdens, including those connected with emissions legislation. A further fuel-price subsidy, however, is currently regarded within the coalition as financially impractical because the necessary budgetary room is considered unavailable. The question is consequently shifting toward whether other energy-related taxes and charges can be adjusted instead, as the government seeks relief measures that can be financed under existing constraints.
Rehlinger urges fuel price cap and windfall tax on oil companies
As fuel prices continue to climb, Saarland Minister-President Anke Rehlinger (SPD) is pressing more forcefully for a price cap. She argues that higher gasoline and gas prices require a political response and that German motorists are bearing the costs of international tensions, including developments involving the United States, Iran and the Houthis. Her appeal reflects a growing political debate over whether the government should intervene directly in fuel markets as consumers face increasingly significant costs.
Rehlinger has called on Reiche to give the Federal Cartel Office greater latitude to act and to combine a price cap modeled on Luxembourg with a windfall tax on oil companies. In her assessment, taxing what she regards as crisis-related profits in the oil sector could generate additional financial room for measures aimed at easing the burden on consumers. The proposal thus combines market intervention with additional taxation as an alternative to a broader, directly funded fuel subsidy.
Fuel prices may take until 2027 to fully stabilize
Manuel Frondel, an energy economist at the RWI-Leibniz Institute, takes the opposite view. He warns that a fuel-price cap could appear to offer immediate assistance while ultimately producing shortages and reducing competition. Hungary’s experience in 2022 is cited as a warning: following the introduction of a price cap, fuel shortages emerged, queues lengthened, purchase quantities were restricted and numerous gas stations ultimately became insolvent. The resulting reduction in the number of stations also meant less competition, illustrating the potential consequences of attempting to suppress prices without resolving underlying supply constraints.
Frondel also considers gasoline prices above 2.50 euros per liter conceivable if the conflict continues for an extended period and global oil supplies become increasingly constrained. In his assessment, a sustained easing would depend on the end of the war involving Iran. For now, the crude oil price remains the central factor behind developments at the pump. Renewed escalation between the United States and Iran, together with additional tensions over the weekend, has heightened concerns about possible supply disruptions and interference with important transportation routes. Those risks have increased the oil market’s risk premium, feeding directly into higher fuel prices.
The energy industry association Fuels and Energy (en2x), meanwhile, expects the fuel market to calm only gradually, with a return toward normal conditions potentially extending well into 2027. Alexander von Gersdorff, an en2x spokesperson, identifies developments in the Middle East as the key factor determining the market’s further direction. Even if the conflict were brought to an end through a peace agreement, he says, fuel prices would not immediately return to normal because a substantial amount of refining capacity has been lost. The market’s adjustment would therefore continue beyond any immediate geopolitical resolution.
For households that need to purchase heating oil ahead of winter, the situation presents a particularly difficult calculation. Consumers whose tanks are approaching empty could consider ordering smaller quantities and relying on the possibility that conditions on global markets will improve somewhat in the near term. Yet any precise forecast remains highly uncertain. Heating-oil prices have also risen sharply because the product is particularly exposed to worldwide shortages of crude oil and petroleum products. Its market is further constrained by competition with diesel for available refining capacity, adding another source of pressure at a time when both supply conditions and geopolitical risks remain unsettled.
