Romanian Gov Approves Five Months Compensation for Fuel Prices

The Romanian Government adopted a five months scheme to compensate for car fuel prices. The decision seems more like a PR thing than a real help for the people, as the compensation is very low.

Since the end of the pandemic, there has been a substantial increase in fuel costs because demand is high and supply cannot keep up. The Ukraine conflict and the Western boycott on Russian imports have added to the price burden. In Romania, a litre of gasoline costs, on average, EUR 1,74, and a litre of diesel costs, on average, EUR 1,86 which compared to the average salary in the country represents a lot.

The Romanian Prime Minister Nicolae Ciuca decided on June 23 to compensate for five months (beginning on July 1). The state and the fuel corporations would split the compensation expense, which is projected to be EUR 400 million (2 billion lei). Prime Minister Ciuca stated that the budget would cover half of this sum, and the remaining portion will be deducted from business profits.

According to Ziarul Financiar, the profile companies will bear one EUR 200 million for compensation. Even though in order to regulate fuel costs, several ideas have been floated, according to the economists, all options were inadequate.

We have identified a fixed compensation solution of 0.5 RON, which will be applied directly to the pump. In support of the partnership between civil society and the government, the government and the population, and the business environment, we have decided to implement this measure. This measure has also been adopted by other countries. It is a measure that involves both the responsibility of the government and the companies in the oil industry.

Nicolae Ciuca, Romanian Prime Minister

Although fuel prices in Romania can not be compared with those abroad, being relatively cheap, the salaries of Romanian citizens do not rise to European standards. Romanian citizens started a real frenzy when prices first rose because many can’t afford them anymore.

Even this measure doesn’t mean almost anything to the average driver, but it could mean something to the high mileage professional drivers.

The specialists compare Romania’s government measures to compensate for fuel prices to other countries. Fuel taxes have been lowered in Germany, where the price of a litre of gasoline has risen above 2 euros, a useless measure since the price paid at the gas station has remained the same. Hungary has set a price cap, but there is still a risk of rising prices because importing has no purpose if there is no profit. In other words, instead of choosing to reduce taxes (VAT and excise), the Romanian Government copied what others were doing.