On Wednesday morning, Economics Minister Roland Lescure said he “regrets” using the term “oil shock” to describe the situation since the beginning of the war in the Middle East. Despite this, fuel prices have still increased drastically, with the average price of diesel at €2.23 per liter on Tuesday evening, and €2.03 for unleaded 95.
Marine Le Pen, leader of the RN deputies, claimed on France Inter that the state is benefiting from this rise in fuel prices. While it is true that the government is making more money from the price hike, it is not a windfall for public finances.
There are two taxes on fuel prices, representing a large portion of the total cost: excise duty, which is fixed and does not change based on price, and VAT. While the VAT is proportional to the price and currently brings in more revenue for Bercy, it only accounts for 10% of the price per liter.
In the medium to long term, as pump prices rise, motorists eventually reduce their consumption, which could quickly offset the positive effect on public finances if the crisis persists, inflation rebounds, and growth declines as forecasted by INSEE. The state could end up losing more than it gains, with declining business activity, reduced household consumption leading to lower tax revenues, and increased public spending to align pension levels and social benefits with inflation.
