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Germany agrees fuel tax cut and price cap to ease record pump costs
Germany considers temporary VAT cut on fuel to ease pump prices
The German federal government and state leaders agreed Friday on a new fuel tax discount and a temporary cap on fuel prices to ease the burden of record-high costs at the pump.
Under the deal, the energy tax on gasoline and diesel will be cut by 14 cents per liter, with the reduced VAT rate bringing total relief to about 17 cents per liter. The discount is set to take effect Oct. 1 and run through the end of 2026, with the total cost of the measures estimated at €2.5 billion, split equally between the federal government and the states .
A crisis-driven price cap, modeled after systems in Luxembourg and Belgium, is to be introduced no later than Jan. 1, 2027, following consultations with the mineral oil industry. The cap would set a maximum price tied to oil market developments, transport costs, and a retailer margin .
Chancellor Friedrich Merz said the measures were a response to drivers reaching their financial limits. “Whoever depends on their car every day is at their breaking point,” Merz said in a statement . Finance Minister Lars Klingbeil called the agreement a step to end “the rip-off at the pumps” .
The agreement comes as diesel prices hit a national average of €2.471 per liter and E10 gasoline reached €2.308 per liter this week, according to ADAC data . A similar fuel discount from May to June 2026 provided around 17 cents of relief per liter but was not fully passed on to consumers .
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