Today is June 24. That means there is less than a week left before the end of the fuel VAT reduction that the Government launched almost three months ago to offset the rise in oil prices caused by the Iran war.
If the Government does not extend this measure, from July 1 it will cost us considerably more to fill the tank, coinciding with the start of the first summer getaway.
The fear of diesel once again hovering near 2 euros per liter
With the outbreak of the Iran war last February, the price of oil rose rapidly and one of the consequences was the immediate rise in fuel prices, so that filling up our vehicle’s tank became significantly more expensive.
Diesel rose to exceed 2 euros per liter and gasoline stayed close, so the Government chose to fix it by applying a reduced VAT to fuels. In addition, it added a direct discount of 20 euro cents per liter for transport professionals.
Through a Royal Decree-Law approved at an extraordinary Council of Ministers on March 20, a package of fiscal measures was implemented that also included a reduction in the VAT on electricity and gas until May 31. The VAT on gasoline and diesel was reduced from the normal 21% to 10%.
The measure is in force until June 30, and the truth is that we’ve noticed it from day one because fuel prices moved away from those 2 euros per liter that we saw in the early weeks of March. When the measures were approved, the Prime Minister, Pedro Sánchez, assured that these rebates would be maintained “for as long as necessary,” but June 30 is around the corner and we still don’t know what will happen.
In theory, the Iran war has ended after the signing of an agreement between the US and Iran, but tensions in the Middle East have not ended, not by a long shot; in fact, Israel continues to bomb Lebanon and the threat of the Strait of Hormuz closing again remains on the table.
If the Government does not move and approves a last-minute extension for this measure, the price of gasoline and diesel will rise on July 1, just as electricity and gas prices rose after the VAT rebate ended on May 31.
The current average price of 95-octane gasoline is €1.45 per liter, while diesel (diesel A) costs an average of €1.52 per liter in Spain. If there is no extension to the VAT cut, within less than a week its price will surge, coinciding, moreover, with the first summer exodus of this year, which will begin precisely on July 1.
To give you an idea, before the VAT cut, the average price of 95 gasoline was €1.80 per liter and after the cut it rose to €1.51 per liter, so filling a 55-liter tank went from costing €99 to €83.1.
In the case of diesel, the price fell from €1.90 per liter to €1.67 per liter after the cut, reducing the cost of filling a 55-liter tank from €105 to €95.
If the VAT reduction is not extended, it’s likely we will see the pre-measure figures again, meaning diesel will approach €2 per liter and 95-octane gasoline won’t be far behind. According to ABC, the Government is indeed considering extending the VAT reduction on fuel and is talking about a new three-month period to apply this measure; six days remain and there is no official information yet.
