German Economy Minister Reiche drafts fuel price cap bill, triggered only if pump prices outpace EU average by 5 points for three straight weeks

View of fuel pumps for petrol and diesel. Source: Robert Michael/dpa

The planned fuel price cap is only intended to take effect if petrol and diesel prices rise significantly more than in the rest of the EU over a three-week period. Special rules could lead to a patchwork of prices at filling stations.

Reiche Wants to Link Price Cap to Foreign Prices

Federal Economics Minister Katherina Reiche (CDU) wants to tie the fuel price cap agreed within the coalition to price developments in other European countries. This is according to the first draft bill from her ministry, which several media outlets cited on Monday. The draft aims to create a legal basis for a price cap, though one that would not be introduced automatically.

According to the draft, various exceptions to the fuel price cap are also planned. A state-imposed maximum price must "remain strictly limited in time," Politico quoted from the draft. The law would not automatically introduce a price cap but would initially create the legal possibility to do so.

A price cap would therefore only apply if petrol and diesel prices in three consecutive weeks each exceed the average price increases of the other EU states by more than five percentage points. The Market Transparency Unit at the Federal Cartel Office would review the conditions on a weekly basis.

Katherina Reiche (CDU), Federal Minister for Economic Affairs and Energy, had long expressed reservations about the fuel price cap. Source: Fabian Sommer/dpa

In addition, the federal and state governments should be able to suspend the price cap if supply problems arise. The states could also generally deviate from the nationwide maximum price, both upward and downward, including for individual districts or smaller areas. Regional price differences currently amount to up to ten cents per liter. Violations would be punishable by fines of up to 100,000 euros for filling station operators and up to 500,000 euros for responsible individuals in companies that set prices.

Read also:

• Weltplus article: "Unrealistic Expectations" — The illusion of a fuel price cap
• Weltplus article: Fuel prices — Tank discount and price cap: The problem behind the government's measures

The law is scheduled to take effect on January 1 and be limited to three months, as other media outlets also reported. Handelsblatt emphasized that the draft is at an "extremely early stage" and has just entered early coordination, which marks the first step of consultation within the federal government.

The black-red coalition agreed in September that the Economics Ministry should develop a price cap for the period starting in January. Until the end of the year, the tank discount, which lowers taxes on petrol and diesel, remains in effect. Afterwards, a cap is intended to ensure lower prices at filling stations. The SPD in particular had pushed for this.

Reiche Opposes Cap

Economics Minister Reiche, by contrast, had made no secret from the outset that she did not support such a measure. Her ministry stated that setting an appropriate nationwide price cap would be hardly feasible. A cap set too high could lead to higher prices, while a cap set too low could jeopardize supply security, particularly in more remote regions, because business there would no longer be worthwhile.

The coalition agreement explicitly states, with reference to supply security, that the fuel price cap should be developed together with the mineral oil industry. However, according to Politico, the industry is refusing to cooperate. Coordination between associations and companies on the matter could be regarded as an "impermissible price-fixing agreement," Politico quoted from an earlier report citing a letter from several associations to the Federal Economics Ministry.

According to Politico, a further tank discount is ruled out in the draft due to the budget situation. A windfall profits tax, as demanded by Federal Finance Minister Lars Klingbeil (SPD) at the EU level, would be "not legally secure in the short term and not immediately effective in providing relief," the report said.

AFP/krö