Fuel discount ends June 30: petrol prices set to rise in Spain

Reduced VAT on fuel ends on June 30: will prices jump overnight?

On June 30, the 20-cents-per-litre rebate that the Spanish Government introduced to contain petrol and diesel prices comes to an end. The measure, which cut VAT on fuel from 21% to 10%, has kept prices artificially low for months. Now, with its expiry in sight, the debate over its real impact is intensifying.

On one side, some argue that the disappearance of the discount will have no significant effects. Their argument: the market has already absorbed the rise in crude oil and people have got used to paying €1.80/litre for diesel. Moreover, Spain's self-employed workers point out that, since the taxable base did not change, the tax saving was minimal. Some speculate that new aid could appear, or that we will simply get used to living without it.

On the other side, the most sceptical forecast a sharp increase. A 10% rise on the current two euros equals 20 extra cents per litre. And not only that: coinciding with the summer getaway traffic, oil companies could add another five cents, pushing prices to record highs. History shows that prices never fall when a subsidy disappears; on the contrary, companies take the chance to squeeze a little more.

The detailed calculation, based on crude oil trends and petrol station margins, leads to an uncomfortable conclusion: either the Government extends the aid, or drivers' wallets will pay the price. But as of today, there is no official confirmation that an extension is coming. June 30 is the key date and, barring a surprise, filling up at the pump will become a luxury again.