Economist Marcel Fratzscher questions the effectiveness of the planned fuel price ceiling, also warning that it could lead to further price increases. Speaking to the “Neue Osnabrücker Zeitung” (Friday edition), the president of the German Institute for Economic Research (DIW) stated, “The disadvantage could be that some providers take the fuel price ceiling as an opportunity to increase their prices and thereby approach the highest price.” This suggests that the fuel price cap will likely result in both winners and losers.
Fratzscher generally doubts the instrument’s effectiveness, arguing that the price cap is highly likely to prove inefficient and opaque.
In regard to the draft law proposed by Economy Minister Katherina Reiche (CDU), Fratzscher criticized the design, arguing that it is likely to cause the cap to sit above the typical market price of most providers, thereby only cushioning extreme price spikes.
The coalition had agreed that the fuel price cap would provide relief at the pumps after the tank discount expires in January. However, Reiche’s draft establishes high hurdles that have not been met in the last ten years. The cap is only intended to take effect if gasoline and diesel rise more than five percentage points above the EU average for three consecutive weeks. If this threshold is crossed, the cap is set to work for three months before the government must make a new decision. Furthermore, the draft includes provisions for exemptions for federal and state governments. Notably, the SPD, the coalition partner, has also voiced sharp criticism regarding Reiche’s proposals.
