German fuel tax cut not fully reaching diesel drivers, Ifo says

German Fuel Tax Cut Provides Limited Relief for Diesel Drivers, Ifo Reports

Analysis of the Temporary Fuel-Tax Cut in Germany

Partial Relief for Diesel Drivers

Oct 22 (Reuters) - German diesel drivers are receiving only part of a temporary fuel-tax cut introduced by Chancellor Friedrich Merz's government this month, according to an analysis by the Ifo institute that suggests some of the relief is being absorbed elsewhere in the fuel supply chain.

Government Measures and Objectives

Germany introduced the temporary tax cut on fuel from Oct. 1 as Chancellor Friedrich Merz's government sought to shield consumers from higher energy costs linked to tensions in the Middle East and shore up support amid weak approval ratings.

Ifo Institute Findings

• Ifo said only about 14 euro cents of the 17-cent-per-litre tax cut had been passed on to diesel drivers over the past seven days.

Historical Context and Comparison

• Ifo's Florian Neumeier said the findings mirrored Germany's previous fuel tax rebate, when diesel prices also failed to reflect the full reduction promised by the government.

Financial Impact and Economic Perspectives

Cost to Public Finances

• Germany estimates the temporary fuel tax cut, which runs from Oct. 1 through Dec. 31, will cost public finances about €2.5 billion ($2.81 billion), with the federal government and states sharing the burden.

DIW Berlin's Assessment

• Another German economic institute, DIW Berlin, said that only around 67% of the fuel tax cut was reaching consumers, citing signs of weak competition at the refinery and wholesale level.

Industry Implications

• Diesel is a key fuel for Germany's trucking and logistics sector, which underpins the country's export-oriented manufacturing economy.

($1 = 0.8896 euros)

(Reporting by Cian Muenster; Editing by Matt Scuffham)