Fuel tax subsidies to cost €2.5 million a month, Finance Minister reveals

Government will subsidise taxes on petrol and diesel to prevent local price hikes, Finance Minister Clyde Caruana told parliament on Wednesday.

During his speech, Caruana said a legal notice was published on Tuesday whereby government will lower the duty to be paid on petrol and diesel to the lowest possible level as permitted under EU regulation.

This is being done to protect local fuel stations from rising prices abroad. In the EU, such prices have increased by some 20-30%, Caruana said.

“While prices at fuel stations remain the same, government is collecting less tax on fuel products to give breathing room for companies to continue sustaining these prices,” he explained.

Caruana said that government is prepared to continue with this measure until the end of next year.

However, he remarked that prices are expected to fall in April or May as production levels start to catch up with the heightened demand.

During the pandemic, the price of oil was negative. The surplus of supply meant that producers of oil were more willing to pay others to take their supply. Due to this surplus, producers pulled back on their oil production in order to bring the supply down.

But as economies quickly recovered the world over, there was not enough supply to cater to sudden oil demand. This led to the current price hike.

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