Keeping fuel prices low causes huge environmental and economic damage while providing no meaningful help for the poor.
A complete of 18 European Union countries have reduced transport fuel taxes or introduced price caps on fuel and a few have done each in response to the energy crisis.
The Hungarian government fixed the patron price of petrol and diesel at HUF 480 or about €1.2 from November 2021 while market prices have been much higher and even exceeded HUF 800, for instance. The federal government reduced the excise duty on fuels by HUF 25, or €0.06 even before that.
Hike
I even have not less than 42 arguments for why artificially reducing fuel prices by government intervention is the mistaken response. The first issue is that reducing fuel prices increases fuel consumption.
In line with the European Environment Agency, a median fuel price increase of 1 per cent within the EU reduces fuel consumption by 0.1 per cent within the short term and 0.3 per cent in the long run. The fuel tax cuts announced up to now within the EU are estimated to steer to an additional 3.3 megatonnes of oil consumption.
The effect of the value decrease on fuel consumption is demonstrated by the Hungarian case, too: in the primary eight months of 2022, Hungary consumed 14 per cent more transport fuel than in the identical period of the previous 12 months, despite the proven fact that the value of other products, especially food, has increased sharply, limiting the households’ disposable income.
The traffic-boosting effect of price-fixing can also be demonstrated by the proven fact that businesses began to limit using company cars in July 2022 once they were banned from purchasing fixed-price fuel. And in Slovakia, a survey found that 30 per cent of the population drive less because the fuel price hike, and almost six per cent of the respondents said they’d switched to public transport either partially or completely due to sudden price hike.
