Fuel tax cut ends: what drivers face in 2027

Drivers in Germany are heading for a more expensive start to 2027. The temporary fuel tax cut on petrol and diesel, in force since 1 October, expires at midnight on 31 December, and the government has no plans to extend it. The fuel price cap that was meant to protect motorists from that date onwards has so far only reached the stage of a first draft, and its conditions are so strict that even members of the governing coalition doubt it will ever be used.

For anyone who relies on a car to get to work, take children to school or reach the next town, the coming weeks are worth planning carefully. How much more a tank of fuel will cost in January depends on oil prices and on how quickly the petrol station chains react, but the tax side of the equation is already clear.

What the fuel tax cut was worth

The relief, known in Germany as the Tankrabatt, lowers the energy tax (Energiesteuer) on petrol and diesel by 14 cents per litre. Because VAT is charged on top of the energy tax, the total saving at the pump is about 17 cents per litre, or around 8.50 euros on a 50 litre tank. The Bundestag approved the measure in September with 434 votes to 128, Euronews reported, as a response to the sharp rise in fuel prices that followed the war involving Iran. Its cost of about 2.5 billion euros is shared between the federal government and the 16 states.

It is already the second such discount this year. A first fuel tax cut of the same size ran from May to the end of June, and when it expired at the end of June, prices at the pump jumped noticeably on 1 July, as we reported in fuel prices jump as tax break ends. In September, before the second discount began, Super E10 reached a record of about 2.27 euros per litre and diesel almost 2.40 euros, according to inside digital.

How much more drivers may pay from 1 January

If the full tax increase is passed on, petrol and diesel will cost about 17 cents more per litre from New Year's Day. The Economy Ministry has ruled out an extension, and the current draft law does not provide for one because of the strained federal budget. Both the Stuttgarter Zeitung and inside digital stress that the real change could be smaller or larger, because crude oil prices, the euro exchange rate and refinery margins also move.

Some in the industry expect a steeper jump on the day itself. Carsten Müller, head of the association of independent petrol stations (Bundesverband Freier Tankstellen), told inside digital he expects prices to climb by 35 to 40 cents at noon on 1 January. Since April, stations in Germany may raise their prices only once a day, at 12 o'clock, so any increase is likely to come in one visible step. inside digital also points to a second cost factor: the greenhouse gas quota that obliges suppliers to mix in cleaner fuels rises from 12 to 17.5 percent in 2027.

For a typical commuter the difference adds up. Someone who drives 1,000 kilometres a month in a car that uses 7 litres per 100 kilometres would pay about 12 euros more per month, or roughly 143 euros a year, at 17 cents extra per litre, the Stuttgarter Zeitung calculated.

The fuel price cap draft and its high hurdles

In mid-September, the leaders of the governing coalition agreed to introduce a fuel price cap by 1 January 2027, modelled on Belgium and Luxembourg, where the state sets maximum prices for fuel. In early November, Economy Minister Katherina Reiche (CDU) presented a first draft, which is now being coordinated within the government, beck-aktuell and ZDF reported.

The draft only allows the government to set a maximum price in an exceptional situation. Petrol or diesel prices in Germany would have to rise in three consecutive weeks compared with the previous week, and in each of those weeks the German increase would have to exceed the average increase in the other EU countries by more than five percentage points. Even then the government would be authorised, not obliged, to act through a regulation. A cap would be limited to three months, could be suspended if fuel supplies were at risk, and the federal states could set different maximum prices for individual districts or postcode areas. The formula for calculating the maximum price itself is not yet defined.

Timing is another weak point. The law is meant to take effect on 1 January, but according to the Stuttgarter Zeitung the price comparison would start with data from the second full week of January, so a cap could apply in February at the earliest. Any jump at the turn of the year would not be covered.

Coalition partners call the fuel price cap too weak

The SPD, Reiche's coalition partner, has openly criticised the draft. Saarland's premier and SPD deputy leader Anke Rehlinger called it a law to prevent a fuel price cap, and SPD general secretary Tim Klüssendorf said, according to inside digital, that "it cannot and will not stay like this". The Finance Ministry under Lars Klingbeil wants a stricter version: officials there warn that oil companies could simply lower prices briefly in the third week to avoid the trigger, and consider three months too short, ZDF reported.

The auto club ACE found that the trigger condition would not have been met once in the past 20 years, inside digital reported. Reiche's ministry defends the high threshold with security of supply, arguing that maximum prices set too low could make fuel deliveries and imports unprofitable. The Stuttgarter Zeitung also cites research on Belgium suggesting that a fixed cap can act as a reference point, with stations pricing close to the ceiling rather than below it.

What the end of the fuel tax cut means for expats

The simplest step is to fill up before the end of the fuel tax cut. A full tank bought in the last days of December saves around 8 to 9 euros compared with the same tank in early January, provided the oil price stays stable. Anyone who has to refuel on 31 December should do so before noon, and on New Year's Day it pays to compare prices before stopping, as inside digital advises. Free price comparison apps that use data from the federal market transparency unit for fuels show current prices at nearby stations, and motorway service stations are usually the most expensive. Our guide to driving in Germany covers the basics for newcomers.

For people who commute by car every day, it may also be worth checking whether part of the journey can be covered by public transport from January. Whether a fuel price cap will exist at all in the first months of 2027, and in what form, is still open: the draft has not yet been approved by the cabinet, and the SPD wants significant changes before it goes to the Bundestag.