The Federal Ministry of Economics, under Katherina Reiche (CDU), has presented an initial draft for a planned cap on fuel prices. The measure is intended to limit “extraordinary increases in fuel prices that significantly exceed price trends elsewhere in Europe,” according to sources within the ministry on Monday. A crucial requirement, however, is that any such price cap must not jeopardize security of supply.
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A government-imposed maximum price would have to “remain strictly limited in terms of duration,” the portal Pioneer reported, citing the draft legislation. The law would not automatically introduce a price cap, but rather establish the legal framework to allow for one, Handelsblatt also reported.
The hurdles for implementing a statutory maximum price at gas stations are intended to be set very high. Furthermore, individual federal states would be permitted to opt out.
“The decisive factor is a price increase that is well above the European average over three consecutive weeks,” said ministry circles. Only then should fuel prices be capped.
According to Pioneer, the specific target planned is for fuel prices, excluding taxes and duties, to rise more than five percentage points more than the EU average. According to an AFP analysis of data from the EU Commission on the development of fuel prices in the member states, this has been the case in individual weeks since the beginning of March, but never in three consecutive weeks.
If a maximum price is set, the states should also be able to deviate from this “in order to take the respective local conditions into account”. They should be able to suspend the price cap or set other maximum prices for individual districts and even smaller areas.
According to the Pioneer report, violations could result in fines of up to 100,000 euros for gas station operators and up to 500,000 euros for those responsible in companies that set prices. The law is scheduled to come into force on January 1st and is limited to just three months, as the “Handelsblatt” also reported.
The black-red coalition agreed in September that the Ministry of Economic Affairs should develop a price cap for the period from January. The fuel discount, which reduces taxes on petrol and diesel, is still valid until the end of the year. The cap should then ensure lower prices at the gas pumps. The SPD in particular campaigned for this.
Economics Minister Reiche, on the other hand, made no secret from the start that she was not in favor of such a measure. Her ministry said that setting an appropriate price cap nationwide was hardly feasible. A cap that is too high could lead to higher prices, while a price cap that is too low could endanger security of supply in remote regions, for example, because business there would no longer be worthwhile.
“The planned fuel price cap is a form of relief with the handbrake on,” energy economist Claudia Kemfert told the newspapers of the Funke Media Group. “It promises protection against high prices, but in practice, it is unlikely to be effective.” Linking the cap to the EU average also means that “if prices rise across all of Europe, nothing happens—even if refueling becomes unaffordable for many people.”
Kemfert primarily urged a reduction in dependence on fossil fuels to protect consumers from price shocks. Furthermore, she called for targeted relief for those most severely affected, the skimming off of crisis-driven windfall profits, and a consistent expansion of affordable mobility alternatives.
According to Pioneer, the draft proposal for the fuel price cap rules out another “fuel discount” (a direct subsidy at the pump) due to the state of the federal budget. A windfall profit tax—a measure also advocated at the EU level by SPD leader Lars Klingbeil—is considered “not legally sound in the short term” and “not immediately effective in providing relief.”
Author: AFP – pe/ilo
Sources: AFP Press Portal