Germany faces €1.1 billion tax loss as fuel prices surge after Iran conflict
Rising fuel prices are set to cost Germany billions in lost tax revenue. The Finance Ministry has dismissed claims that the government benefits from higher pump costs, warning instead of a net financial loss. Experts now predict a shortfall of over €1 billion if prices remain elevated for a full year.
Fuel prices surged in late February 2026 after the outbreak of war in Iran. Super E10 reached around €2.05 per litre by early March, up 30 cents from earlier in the year. Diesel climbed even higher, hitting €2.19 per litre—a 47-cent increase. Prices eased slightly after 10 days but remained well above 2025 averages of €1.69 for E10 and €1.62 for diesel.
The 19% VAT on fuel generates extra revenue of €320 million each month at current prices. However, 40% of fuel is VAT-exempt, cutting this windfall to roughly €200 million. The federal government keeps 47% of this amount, while the rest goes to states and local authorities.
Higher costs are pushing consumers to cut back, with fuel sales expected to drop by 5%. This would shrink the VAT gain to about €150 million per month. At the same time, lower sales reduce energy tax revenues by €140 million monthly. Tax expert Stefan Bach calculates that, over a year, these factors would leave the government €1.1 billion worse off.
The current spike follows a similar pattern seen in 2022, when the Ukraine war sent prices to record highs. Super E10 peaked at €2.20 per litre in March that year, while diesel hit €2.32. Prices later fell but remained above pre-war levels, averaging €1.86 for E10 and €1.95 for diesel in 2022.
A prolonged conflict in Iran could deepen economic uncertainty and further strain public finances. With fuel costs squeezing household budgets, the Finance Ministry now faces a dual challenge: shrinking tax revenues and weaker consumer spending. The government has ruled out any financial gain from the current price surge.
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