An End to High Costs?

Gas Price Cap: What This Means for Drivers

The SPÖ and ÖVP have finally reached a compromise after all.(Bild: APA/HELMUT FOHRINGER)

After tough negotiations, the three-party coalition agreed last night on a rapid fuel price cap. Drivers will start to feel the effects at the pump as early as April 1. Two measures are being implemented: A margin cap will be introduced for refineries and gas stations, and the mineral oil tax will be temporarily reduced. The relief will amount to an average of ten cents per liter.

The plan in detail: In crisis situations such as the current one, the profit margins of refineries and gas stations will be fixed for one month at a time, and the increase in these margins compared to pre-crisis levels will be halved. 

No one should profit from the current turmoil in the crude oil markets “while people suffer from rising prices,” explained Chancellor Christian Stocker (ÖVP). This intervention does not mean that profits can no longer be made. It is only intended to prevent a crisis from becoming a business model, explains Vice-Chancellor Andreas Babler (SPÖ).

The SPÖ, ÖVP, and NEOS have finally reached a compromise.(Bild: APA/HELMUT FOHRINGER)

Additional revenue will be “returned”
At the same time, the mineral oil tax will be reduced. This is intended to return the additional revenue generated by the value-added tax to motorists. The relief is to be directly proportional and budget-neutral. Foreign Minister Beate Meinl-Reisinger (NEOS) emphasized that this is not about absolute price caps. The chosen model is “market-oriented” and would not distort price signals. With regard to the trigger of the energy crisis, she stressed the importance of becoming less dependent on oil and gas.

The actual additional revenue will be calculated and used as the basis for assessment. Initially, the tax will be reduced by 5 cents for both gasoline and diesel. The measures are temporary and may be suspended or extended at any time.

Hintergrund

Steuern auf Treibstoff

Die Mineralölsteuer (MöSt) ist eine Verbrauchssteuer auf Kraftstoffe und Heizstoffe, die pro Liter oder Kilogramm anfällt. Sie beträgt aktuell rund 48,2 Cent pro Liter Benzin und 39,7 Cent pro Liter Diesel. Zusätzlich zur MöSt fällt seit Oktober 2022 eine CO₂-Bepreisung pro Liter an. Hinzu kommen 20 Prozent Mehrwertsteuer.

Steigende Preise erhöhen somit nur die Einnahmen aus der Mehrwertsteuer, nicht aber aus den beiden anderen Abgaben, weil diese Mengensteuern sind. Nur wenn mehr verbraucht wird, wird mehr eingenommen.

With the measures adopted today by the Council of Ministers, the government is responding to the tense situation on global oil markets. “This is intended to prevent massive price increases from becoming entrenched and thus to avoid undermining the competitiveness of the domestic economy and purchasing power,” states the Council of Ministers’ report.

“Economic distortions” are to be prevented or mitigated. Such a distortion occurs when the price of gasoline or diesel rises by 30 percent over a two-month period.

Decision to follow next week
The measures are set to take effect on April 1. They will be limited until the end of the year. It has already been decided that the package will be approved by the National Council as early as next week. A special session has been scheduled for next Monday to introduce the legislative amendments. The formal decision will be made during one of the regular sessions on Wednesday or Thursday. On Friday, the Federal Council—also in a special session—is expected to ensure the package takes effect on time. However, a two-thirds majority is required to pass the package—meaning it will also need the votes of the FPÖ or the Greens.

Reactions are mixed
Initial reactions to the announced measures have been mixed. Some feel the package does not go far enough. “It’s good that the current government has the courage to step in instead of simply letting inflation run its course,” said Tobias Schweitzer, an economist at the Chamber of Labor. Helene Schuberth, executive director of the Austrian Trade Union Federation (ÖGB), also advocates for price monitoring to ensure the measures’ effectiveness. The PRO-GE union welcomes the measures while warning against “false restraint” in the fight against inflation.

ÖAMTC: Price reduction “not a major success”
The ÖAMTC and ARBÖ also welcome the package, though they had expected a bit more. “A price reduction of an average of ten cents per liter is ultimately no great success, given current fuel prices,” says Martin Grasslober, head of the ÖAMTC’s transportation division, in a press release.

The liberal think tank Agenda Austria is not pleased with the measures. It calls the margin cap “sloppy populism.” A tax cut is welcomed in principle, but it must be “permanent and strategic.” The accusation of populism against the government also comes from the environmental organization WWF, albeit from a different angle. Instead of a reduction in the mineral oil tax, they are calling for “a noticeable discount on the climate ticket, a rapid public transit push, and the expansion of safe bike lanes.”