What are Germany’s new measures to cushion the oil crisis blow?

The German government has introduced two new measures to help cushion the blow of the oil crisis for consumers. What impact will the new policies have?

German gov’t introduces tax cuts for fuel and bonuses

Following the rising fuel prices caused by the US-Israeli attacks on Iran, Germany’s CDU/CSU-SPD government has announced two new policies designed to reduce the financial pressure on residents.

The first measure is cutting taxes on petrol and diesel. At the beginning of the Iran war, the price of petrol, Super and Super E10 in Germany sat between 1,75 and 1,83 euros per litre. As of April 14, prices have risen to between 2,10 euros and 2,89 euros per litre. Germany is particularly vulnerable to energy price shocks because it is highly dependent on fossil fuels.

The government will now cut taxes on petrol and diesel by around 17 cents per litre for the next two months, a measure expected to cost the public purse around 1,6 billion euros. Fuel companies will have to pay less tax and are expected to pass these savings on by reducing prices for customers.

The second cushioning measure announced on Monday is a tax-free "relief bonus" (Entlastungsprämie). Employers can choose to pay their employees a tax-free bonus of up to 1.000 euros during 2026, but they are not obliged to pay any bonus. The government expects the incoming tobacco tax increase to cover the shortfall incurred from the Entlastungsprämie.

What other measures has the gov’t introduced?

Until now, the government has only introduced one other policy to manage rising consumer prices since the US-Israeli attacks on Iran began. As of April 1, fuel stations in Germany are only permitted to raise prices once per day, but may reduce prices an unlimited number of times.

However, there is no limit on how much stations can raise prices daily, and there is no obligation to reduce prices. The cost of diesel nonetheless spiked shortly after the measure was introduced, and it seems to have had little tangible impact for many consumers.

How will the new relief measures impact you?

So, how will the new diesel and petrol tax cuts and tax- and duty-free "relief bonus" impact you? Residents who drive and work for companies able and willing to pay bonuses will see the greatest benefits.

Others shouldn’t hold their breath. “The German economy will face a significant burden over an extended period," Chancellor Friedrich Merz (CDU) said at the government press conference on Monday. 

After two years of economic shrinking, in late 2025 the European Commission forecast Germany’s gross domestic product (GDP) to grow by 1,2 percent in 2026. As of early April, the annual growth forecast has been reduced to 0,6 percent. 

What’s more, economists at the Ifo Institute for Economic Research and the German Economic Institute (IW) recently accused Merz of misusing the government’s 500-billion-euro “special funds” to cover daily costs rather than make additional investments.

Food set to get more expensive in Germany

Because nitrogen fertiliser is largely made using natural gas, the cost of food is also expected to increase. According to the Food Price Index published by the Food and Agriculture Organisation of the United Nations (FAO) on April 3, global food prices are 2,4 percent higher than in February and 1 percent higher than in April 2025.

Speaking of the two measures announced on Monday, Franziska Brantner (Greens) told the dpa, "The fuel discount was an expensive gift to the oil companies -- not to the citizens”. Economist Monika Schnitzer, a member of the government’s economic advisory council, said Merz had chosen “the worst option” of all cushioning measures discussed.

Schnitzer said the measures would only cut prices for people who could easily afford them and would have considerable long-term consequences. “Targeted support for those in need would have been the better decision,” she added.

At the EU level, there is currently an ongoing assessment of measures regarding the mineral oil industry, namely, adopting measures similar to those used in 2022 following Russia’s full-scale invasion of Ukraine.

These included a windfall profit tax on fossil fuel companies and giving competition watchdogs greater authority to monitor behaviour that abuses customer dependence.