Italy Cuts Fuel Taxes As Iran Crisis Drives Oil Higher; Germany Refuses Relief Despite Windfall

Submitted by Thomas Kolbe

A robust market economy unfolds its maximum absorption capacity precisely during external shocks. In such cases, policymakers would essentially only need to sit still, as the storm clouds usually pass on their own—true to the principle that high prices are the cure for high prices. This, of course, only applies to energy markets if governments have not already removed themselves from the equation through grotesque political interventions long before the crisis.

For European economies, however, the opposite holds true. They are overregulated, fiscally overburdened, and structurally fragile systems that can barely deploy effective shock absorbers in the face of the Iran crisis. High energy prices hit relentlessly, and national policy responses now diverge sharply across competing European jurisdictions.

Italian Prime Minister Giorgia Meloni reacted swiftly to the tightening situation at the country’s gas stations. Following a cabinet decision on March 18, an immediate reduction in fuel excise taxes came into force via decree, applying to both gasoline and diesel. Prices are expected to fall by 25 cents per liter—across the board for households, businesses, and all market participants, according to government sources.

In Italy, policymakers appear to keep a close ear to the ground—attuned to the realities faced by citizens, businesses, and traders alike. In stark contrast to the government of Chancellor Friedrich Merz, Rome is opting for relief measures aimed at the private sector amid a crisis that is steadily eroding purchasing power. Meanwhile, Merz and his finance minister Lars Klingbeil are entangled in debates over tax increases—detached from the Hormuz disruption and largely disconnected from the realities of workers, commuters, and companies. Berlin’s fiscal apparatus appears self-referential and monotonous, advancing to the next act of its own tragicomedy.

Italy—once more statist in spirit than its northern rival—now acts swiftly, pragmatically, and decisively. The tax cut will initially remain in place for 20 days but is likely to be extended should the situation in the largely blocked Strait of Hormuz fail to improve. The Italian government thus demonstrates a capacity to act that is sorely lacking in Germany. Merz, by contrast, remains hesitant when it comes to rolling back state intervention—a committed statist who, even in a moment of acute crisis, fails to initiate the necessary fiscal steps to shield businesses and consumers from the gathering storm.

In Berlin, policymakers continue to deny both citizens and businesses the long-overdue relief from soaring fuel prices—despite the fact that roughly two-thirds of the price flows to the state through various taxes. Perhaps that is precisely why the issue is being postponed. What prevails in Berlin is a mentality of extraction, even as public coffers run dry. Spending cuts that could create room for relief are being avoided at all costs in the 2026 super-election year.

The situation in Rome is markedly different: In addition to cutting fuel taxes, the Italian government is granting tax credits to transport companies, directly linked to verified diesel consumption.

These credits are intended to relieve the logistics sector—one of the hardest hit by rising energy prices—and to prevent escalating costs and extreme volatility in energy markets from fully passing through to freight rates and consumer prices.

But the measures do not stop there. The Italian government has quickly assembled a broader package aimed at curbing potential price speculation at the pump. To prevent excessive markups, an anti-speculation mechanism is being introduced to detect and limit unjustified price increases.

In practice, this means that retail fuel prices will be tightly linked to actual movements in global crude oil prices, ensuring that unjustified markups are immediately suppressed.

Oil companies and gas station operators are required to regularly report their prices to authorities, which monitor the entire supply and distribution chain. Deviations from price movements justified by changes in crude oil markets may result in sanctions.

In the acute emergency triggered by the Iran crisis, the executive power of the Italian government proves to be a clear advantage. It can enact temporary measures swiftly via decree. The decision to cut fuel taxes is particularly notable given that Italy, like Germany, imposes very high fuel taxes. Up to 62% of gasoline prices and around 58% of diesel prices are collected by the state.

The importance of the tax cut became evident on commodity markets Thursday afternoon, when WTI crude rose to around $114 per barrel. The attack on Iran’s South Pars energy complex delivered another shock to the market overnight.

For Italians, there is hope that this acute crisis will ultimately lead to a broader realization—especially for Transport Minister Matteo Salvini and Prime Minister Giorgia Meloni—that relieving citizens of fuel costs is fundamentally the right approach. Mobility and affordable transport costs remain key competitive factors.

The state must learn to exercise restraint. A lean state protects citizens in times of crisis far better, thanks to its flexibility, than the bloated bureaucratic apparatus we know today. Though this is a conclusion Germany’s chancellor and finance minister would strongly dispute.

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About the author: Thomas Kolbe, a German graduate economist, has worked for over 25 years as a journalist and media producer for clients from various industries and business associations. As a publicist, he focuses on economic processes and observes geopolitical events from the perspective of the capital markets. His publications follow a philosophy that focuses on the individual and their right to self-determination.