The temporary reduction in fuel prices announced by Prime Minister Kyriakos Mitsotakis from the floor of the Greek Parliament is expected to take effect in the coming days, after he asked the country’s two oil refineries (HELLENiQ ENERGY and Motor Oil) to finance the measure.

However, despite the strong communication impact of the announcement, market estimates suggest that the measure will have limited effectiveness and is unlikely to provide substantial relief to households that continue to struggle with rising costs.

Fuel prices: A measure with an expiration date

Deputy Prime Minister Kostis Hatzidakis is expected to provide further details on Monday or Tuesday regarding the implementation of the discounts, which will effectively be provided by the two refineries. The goal is for fuel trading companies and gas stations to keep the summer price of gasoline 10 euro cents lower and diesel fuel 5 euro cents lower than what prices would have been without the intervention by the energy groups.

The measure provides a discount of 10 euro cents per liter on unleaded gasoline and 5 cents per liter on diesel fuel until the end of August, with the total cost estimated at €40 million, according to Deputy Prime Minister Kostis Hatzidakis. So far, however, neither HELLENiQ ENERGY nor Motor Oil has made an official announcement on how the government initiative will be implemented.

According to Hatzidakis, the refineries will finance the reductions with €40 million. However, this measure also has an expiration date, and no one can predict the future path of fuel prices given the uncertainties in the geopolitical landscape, international oil markets, and limited petroleum supply.

A temporary “brake,” not a solution

According to sources in the petroleum market, the measure will be implemented in a way similar to the subsidy scheme used for diesel fuel during the April-June period. The refineries will absorb part of the increases in international prices, keeping their selling prices to fuel trading companies lower.

In practice, the two energy groups will act as an informal price cap in the wholesale market. However, the measure has a clear end date and does not change the way prices are determined. If international prices continue to rise, drivers will continue to see more expensive fuel at the pump, simply with part of the increases temporarily absorbed.

Taxes “erase” the reduction

The biggest problem, however, remains the extremely high tax burden on fuels, which the government continues to leave untouched.

For unleaded gasoline, around 57% of the final price corresponds to taxes and fees. This means that, from the nominal reduction of 10 cents per liter, a significant portion is effectively offset by the tax burden included in the final price. Similarly, for diesel fuel, where taxes account for almost 46% of the price, the actual relief for consumers is significantly smaller than what is presented in government announcements.

In other words, the announcement creates the image of a significant intervention without addressing the main factor keeping fuel prices high in Greece.

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