The fuel rebate: A rare consensus among economists against government policy

When making decisions, politicians often have to weigh the arguments of experts with very different opinions. This is particularly true for economic policy. But things are different when it comes to fuel discounts. The expert opinion is almost unanimous - and black and red do the opposite.

With the fuel discount, the black-red coalition achieved something rare: it managed to unite almost all independent economists. On almost all economic policy issues - from national debt to taxes, subsidies, the energy transition to competition law - the opinions of scientists differ widely, including bitter personal feuds between leading professors. Even the so-called economists appointed by the government rarely publish a statement without at least one of their members putting their objection on record.

Economists' opinions also differ widely on the question of whether and how the state should protect its citizens from rising energy prices. A fuel price cap and an excess profits tax find supporters among left-wing, employee-oriented economists. Ordoliberal representatives, on the other hand, strictly reject such interventions in the market. They advocate letting the market take effect in the current situation and, at most, providing targeted support to financially weak households.

When it comes to fuel rebates, however, the experts' opinion is rarely unanimous: almost everyone rejects it. On the one hand, the measure is very expensive. The last time, the reduction in energy taxes on petrol and diesel from May to June tore a hole of 1.6 billion euros into the already empty state coffers. At least part of it flowed into the accounts of the oil companies as additional profit.

Economists also unanimously criticize the fact that a large part of the relief that reaches consumers does not go to those who need it most. Drivers, especially those with high-powered vehicles that consume a lot of fuel, belong to the financially better-off segment of the population on average. Poorer people, on the other hand, own significantly fewer and, on average, more economical cars. Subsidizing the fuel consumption of wealthy drivers with tax money tends to be a redistribution from the bottom up.

From the economists' point of view, the tax discount also has a fatal effect on consumption: those who fill up the tank the most benefit the most. What would be important, however, would be incentives to reduce fuel consumption. The cause of the current crisis is the shortage of oil and fuel on the world market, which was primarily caused by the Iran war. That is why most economists believe it is important to maintain the dampening effect of high prices on consumption.

In an interview with Deutschlandfunk, the economist and energy expert Georg Zachmann from the Bruegel think tank even described the fuel discount as a "contagious disease": If a country lowers prices at gas stations in this way, it also puts pressure on the governments of neighboring countries to follow suit.

The discount supports consumption despite the limited supply. Prices are being driven up further. The pressure on politicians for further relief measures is increasing – a vicious circle.

The black-red coalition has thus managed to unite the usually divided economists' guild. Among numerous options for relieving consumers, the federal government has singled out the one that has almost no supporters among independent experts.