A study indicates that the 20 cent discount on diesel raised prices and increased the profits of oil companies

It was the Government’s most popular measure to alleviate the damage to consumers from the consequences of the Russian invasion of Ukraine in February 2022, in addition to the inflation crisis it exacerbated. But it was also one of the most controversial measures. And the most expensive. For this reason, the general discount of 20 cents on fuel has been examined again in a study that indicates that the bonus on diesel raised prices and increased the profits of oil companies in Spain, which have been posting historic profits since 2021.

This is research by economists Juan Luis Jiménez, Jordi Perdiguero and José Manuel Cazorla-Artiles, which has been improving its methodology in the last two years. His final calculations (published in this article academic) conclude that gas stations “appropriated” at least 850 million of the discount on diesel. A measure that the Government maintained between April and December 2022 and that had a total cost for the public coffers of around 4,250 million, according to figures from these same experts.

“We have improved previous estimates, not only by expanding the database and the estimates themselves, but also by the intense and very constructive evaluation process that our article has undergone,” they explain. The research collects and compares data on gasoline and diesel prices before the deployment of the discount, the period in which it was in force and the subsequent months, in Spain and in other countries that did not apply this bonus (Austria, Czech Republic , Denmark, Estonia, Finland, Latvia, Lithuania, and Slovakia). In addition, it crosses them with the price of a barrel of Brent oil in the financial markets.

The first conclusion that the study obtains is that “the price of diesel increased due to the existence of the subsidy.” The second is that, “after eliminating the subsidy [a partir del 1 de enero de 2023]the price differences were again the same as they were before the subsidy, which confirms the first result.”

“In fact, this price increase exceeds 5 euro cents, meaning that diesel consumers received less than 15 of the 20 cents that the price of this fuel should have lowered,” the economists observe.

“What does this mean? On the one hand, a part of the more than 4.25 billion public euros that the measure cost went to the profits of the service stations and oil companies. Directly. And on the other hand, another part returned to the State via VAT, as the price became more expensive and, therefore, the revenue per liter consumed was higher,” these experts continue, who have also published their research in the specialized blog ‘Nothing is free’.

Its methodology, explained in detail in the academic article, shows “that more than 1,073 million euros did not reach consumers, 857 million going to companies and 216 to public revenues.” The 857 million that increased the profits of the oil companies are “a minimum”, because they are limited to the case of diesel.

The research also finds effects on gasoline prices, “which increased by two cents due to the subsidy,” but the methodology in this case offers a high margin of error that prevents obtaining more certainty.

What Juan Luis Jiménez, Jordi Perdiguero and José Manuel Cazorla-Artiles do defend is that the evaluations for Germany, France or Italy show policy transfers at prices of 100%, but in Spain it would have been 73%. The main reason is that in our country we have “a market with severe competition problems in all links of the production chain.”

More criticism of fuel discounts

The criticism of this measure does not end here. The Government defended that the fuel discount was responsible for one point of the nearly four that the set of policies adopted to alleviate the price crisis contained inflation in 2022, which exceeded 8% on average, a suffocating record, which Spain had not suffered since the 80s.

But the Independent Authority for Fiscal Responsibility (AIReF) warned at the end of that same year that the third of the richest families in our country took advantage of almost 40% of the total money allocated by the Government to the 20 cent discount on fuel. . The poorest third of families, barely 20%.

Mainly, because the rich can and because they have more and larger vehicles. Meanwhile, the measure favored greater consumption in the midst of the energy crisis and climate emergency.

“As several organizations pointed out, we hope that in future occasions targeted aid will be chosen, depending on the level of income, instead of this type of policies,” conclude Juan Luis Jiménez, Jordi Perdiguero and José Manuel Cazorla-Artiles.

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