Taxes make up half of Europe’s surging fuel prices amid Middle East war

Fuel prices have been soaring across the European Union this month, but it’s not just the war in Iran that is to blame for the painful increase.

Alongside the market-driven rise due to the conflict, the tax component has been playing a role, too, exacerbating the sting in many countries, including Germany.

Tax forms over 50% of pump prices in the EU

Prices of gasoline and diesel have risen significantly in Europe since the U.S. and Israel launched their military operation against Iran at the end of February.

But the rising cost of crude oil is not the sole reason for the increase as taxation is responsible for a large portion of the final prices at gas stations across the Old Continent.

Taxes account for more than half of the fuel bills overall and they explain why drivers in some member states pay more than in others, Euronews noted in a report on Friday.

While the over $100 per barrel of Brent are felt by everybody, taxes like VAT, excise duties and other specific levies determine the final cost in each individual case.

These charges make up 52.1% of the price of regular gas, Eurosuper 95, and 44.5% of that of diesel, on average in the EU, according to fuel data compiled by the European Commission.

Taxes have the smallest share in Bulgaria, Spain and Hungary – 43.9, 45 and 45.2% – and the largest in Finland, Ireland and Slovenia – 57.2, 57.3 and 57.8%, respectively.

In 20 member states, total taxes account for more than 50% of the price of petrol. Among the Union’s biggest economies, Italy leads with 55%, followed by Germany and France, with 54.5% and 53%.

The tax rankings differ between petrol and diesel, the authors of the study point out, and the burden is generally lower for the latter, averaging 44.6% for the whole European Union.

Taxes form less than 40% of the diesel price in four countries – Estonia (37.6%), Spain (38%), Sweden (38.5%), and Bulgaria (39.7%), and more than 50% in Slovenia (50.1%), Ireland (50.6%), Italy (51.1%), and Malta (54.3%).

Pre-tax base varies between member states

Pre-tax fuel rates vary significantly between member states, influencing final prices as well. And a high tax share does not necessarily result in an equally high final price, as is the case with Slovenia, which has the highest tax rate for gas, but not the highest price.

According to the figures provided by the Eurostat office, the average EU price of petrol, tax included, was €1.84 per liter as of March 16 (approximately $2.12 at the current exchange rate).

Eurosuper 95 was most expensive in the Netherlands (€2.26), Denmark (€2.18), and Germany (€2.09), and cheapest in Bulgaria (€1.33), Malta (€1.34), Cyprus (€1.42), and Slovenia (€1.44).

The Netherlands (€2.26), Denmark (€2.21), Germany (€2.15), Finland (€2.11), and Italy (€2.03) had the highest diesel prices, while Malta (€1.21), Bulgaria (€1.44), and Slovenia (€1.48) saw the lowest. The EU’s average was €1.95 a liter ($2.25 at the time of writing).

Germany registers some of the steepest price jumps

While the EU determines a minimum excise duty for fuels, member states are free to set higher rates, including for value-added tax. Various carbon, energy or other taxes are levied by some countries, which additionally burden fuel prices.

Such is the case in Germany, the bloc’s economic powerhouse, which charges more than other European nations for environmental reasons, including for CO2 consumption, and to fund its infrastructure.

As a result, gasoline in the Federal Republic rose by nearly 5% in the past couple of weeks, when neighboring Austria and France saw a 2% increase, Euronews highlighted in another report.

The spike was also noticed by the European Commission, which ranked Germany among the members with the highest increases, together with the Netherlands, Denmark and Finland.

And while a task force set up by the government in Berlin to tackle the issue accused oil companies of price gouging, the industry returned fire by reminding that over half of the fuel price is made up of taxes and duties, urging authorities to look into these components first.

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