The VAT reduction slows the rise in fuel prices, but they are still more expensive than before the war.

BarcelonaThe reduction in VAT on fuel has slowed the price increases, but fuels are still more expensive than before the start of the war in Iran. Furthermore, the fuel currently being sold at gas stations was purchased a few days ago and therefore does not yet reflect the reduction in the special tax on hydrocarbons.

However, in the case of 95-octane gasoline, yesterday, Sunday, the average price in Catalonia was €1.622 per liter. This price was almost 10.5% cheaper than on Saturday, before the VAT reduction was applied, but still 9.15% more expensive than on February 28, when the conflict began. As for automotive diesel, yesterday, Sunday, the average price in Catalonia was €1.79 per liter, 8.15% cheaper than on Saturday, before the VAT reduction, but almost 25% more expensive than on the day the war began, February 28.

In fact, the well-known "rocket effect" is once again evident, demonstrating economically that when the price of oil rises, fuel prices immediately reflect the increase, while price decreases are much slower.

Part of this slowness in price reductions is due to the fact that the reduction in the hydrocarbon tax has not yet been applied because gas stations are still depleting the stock they paid for with that tax. The president of the Catalan Association of Service Station Associations, Albert Campabadal, explained to ACN that consumers will notice the price drop more by mid-week, when gas stations will begin receiving fuel with the reduced hydrocarbon tax. Campabadal explained that the Catalan Association of Service Station Associations views the VAT reduction on gasoline and diesel "very positively," as they believe there is "an excessive tax burden" on these products, which increases when prices rise. However, he pointed out that the fuel market "fluctuates daily" and it's difficult to know "what will happen the next day" in such an uncertain geopolitical context. He even warned that there could come a time when the tax reduction "is nullified by the rise in the price of Brent crude." "We hope not, but the situation isn't good," he cautioned.

Despite the recent price increases, Campabadal indicates that they haven't yet noticed a drop in fuel consumption in Catalonia. "Truck drivers absolutely need diesel, and private individuals also use a lot of their own cars. These days, with the commuter rail service as it is, they don't have the confidence of arriving on time for some journeys," he explained.

Monitoring to prevent abuses

The government has tasked the National Markets and Competition Commission (CNMC) with ensuring that oil operators apply these tax breaks without abuse. The Minister of Economy, Trade and Business, Carlos Cuerpo, said that the Spanish government will closely monitor the tax reduction applied to fuels to ensure it translates into an effective price decrease and that there are no unjust profiteers in such a tragic situation as the one caused by the recent price surge and international tensions.