Economist Manuel Frondel argues that the fuel discount planned by the federal government functions as a message directed at consumers. Citing the RWI – Leibniz Institute for Economic Research, the scholar stated that the state cannot continuously subsidize prices. While he currently deems the planned discount important from an economic cycle standpoint and as a form of political gesture towards consumers, he noted that announcing it two days before the regional elections was no coincidence-it is meant to show that action is being taken now.
Frondel defended the fuel discount against criticism, such as the argument that high earners also benefit. Ideally, the state should provide targeted assistance to households in need. However, since such direct payments are not easily implementable, the researcher considers the fuel discount to be a practical and equitable solution. He explained that consumers who have paid extra value-added tax due to rising petrol and diesel prices in recent months will now receive some compensation through the planned decrease of 14 cents per liter in energy taxes.
In Frondel’s view, the state’s intervention in the market through the fuel discount is justifiable. He pointed out that the pure theory of price acting as a scarcity signal simply does not apply to fuel prices; the price had been artificially inflated by increased VAT, the CO2 levy, and the energy tax.
Nevertheless, Frondel issued a warning regarding the price ceiling that the federal government is also considering. He strongly advises against establishing a fixed upper limit, such as the one implemented in Hungary. He warned that this measure led to long queues at gas stations and restricted drivers to purchasing only small amounts, resulting in fuel shortages. At least a dynamic ceiling, like the one used in Belgium which accounts for crude oil price fluctuations, would be significantly less damaging.
