Luxembourgh Times

Luxembourg attacks fuel price inflation with aid schemes

After big price spikes, government action to cut petrol prices and cover gas distribution costs should reduce impact on households

Luxembourg's Chamber of Deputies

Luxembourg's Chamber of Deputies © Photo credit: Gerry Huberty

Luxembourg lawmakers have moved to quickly push down the rising cost of motor vehicle fuels and home heating gas brought on by Russia's invasion of neighbouring Ukraine, with officials pulling levers largely unknown to consumers.

On Thursday, Parliament is expected to approve a €12 million plan to cut the per-litre price of petrol and diesel temporarily by 7.5 cents, or about 4%.

The state budget will cover the excise duties paid by distributors through July for industrial, commercial and agricultural fuel and to the end of the year for other motor fuels, the parliament said in a statement.

This followed the adoption by lawmakers on Wednesday of a plan to cut natural gas costs for residential customers, starting on Sunday.

The state budget will cover the distribution network costs for natural gas going to residential customers for the rest of this year. The final gas price consumers end up paying also comprises the cost of purchasing the gas, and taxes.

The amount of savings each consumer experiences will depend on their gas consumption and the contracts with suppliers, the government said.

The moves are part of Prime Minister Xavier Bettel's government's efforts to fight inflation with support package for households and businesses carrying a €1.3 billion price tag, Finance Minister Yuriko Backes said on Wednesday.

Among the measures taken is a tax credit to low-income workers starting in August and continuing until March 2023.

Higher petrol and energy costs have been driving a surge in consumer prices this year as Russia's war led the EU to cut back on how much of Moscow's carbon-heavy products it would buy and what Russia would sell.

Europe depends heavily on Russian gas and demands by some EU ministers for an embargo have been rejected by other countries in the bloc.

Fuel prices rose 8.2% between February and April, Luxembourg's statistics agency Statec said earlier this month. Motorists were particularly hit hard, with a 15% rise in diesel costs and over 9% for petrol in March.

Disruptions in fuel supplies and other war fallout will likely cut Luxembourg's total economic output this year to 1.4%, less than half of an earlier gross domestic product forecast of 3.5%, Backes said on Wednesday.