In the context of the European Semester, what policy adjustment will the Commission advocate as a response to the significant fall in oil prices?
Does the Commission consider that this windfall should be passed on entirely to consumers of fossil fuels, or does it consider that the benefit should be shared?
In particular, does it agree that a measured increase in excise duty/fuel tax would have three benefits: helping governments to reduce deficits, helping to prevent the fall in prices from having an adverse effect on CO2 emissions, and attenuating the risk of deflation?
Answer
Oil prices are currently low because of excess production, combined with lower consumption and increased energy efficiency. Given the EU’s import dependence and global climate change challenges, the EU needs to take additional measures to reduce its oil consumption. In addition, the Commission will continue to promote further structural reforms in energy markets and the development of energy infrastructures in the context of the European Semester and as part of the ambition of the EU energy and climate policy framework and the Energy Union.
Lower fuel prices are expected to be a key factor driving the expansion of private consumption growth in 2015. On the other hand, falling oil prices might prompt Member States to increase the excise duties for fuels and thereby offset the declining VAT revenue. Additional revenue from a potential increase in excise duties may contribute to financing a cut in labour taxes, which would have a positive impact on economic growth and employment in a context of a lacklustre domestic demand.
Increasing excise duties on oil products can increase government revenues and may alleviate the risk of deflation. As mentioned above, this could also provide an opportunity for a tax shift from labour taxes towards energy taxes.
