Vucic: Fuel Excise Down 20%, Gas Reserves at Record Low
Speaking from Paris, the president wants a 20% excise cut instead of the announced 10%. The state already forgoes 27 dinars per litre, and without that cut diesel would cost 247 dinars today.
- On July 14, speaking from Paris, Vucic announced he would ask the government and the finance minister for a 20% cut to the fuel excise duty rather than the 10% previously announced.
- The state already forgoes roughly 27 dinars per litre: without the existing cut, diesel would cost 247 dinars a litre today.
- Oil rose from $78.3 a barrel on July 13 to $85.4 on July 14, with a warning it could head towards $90.
- Gas reserves have never been lower, according to the president, while European gas passed 545 euros per 1,000 cubic metres.
Around 27 dinars a litre: that is what the Serbian budget currently fails to collect on every litre of fuel sold because of an excise duty that has already been reduced, and President Aleksandar Vucic has now signalled that the figure should grow. Speaking to reporters in Paris on July 14, Vucic said he would propose to the government and the finance minister that the fuel excise be cut not by 10 but by 20 percent. The government is due to set new pump prices by Friday.
The arithmetic behind that announcement is simple and uncomfortable. The excise was already lowered by 10 percent from Monday. Without that move, the president says, diesel would sell at 247 dinars a litre today. Put differently, the gap between the price a driver sees and the price the market alone would set is covered out of public revenue: the state is deliberately declining to collect part of what it is owed in order to hold the pump price at a level it deems tolerable.
The trigger is not domestic. Oil climbed from $78.3 a barrel on July 13 to $85.4 the very next day, and Vucic warns that continued conflict around the Strait of Hormuz and escalation in Ukraine could push it towards $90. When the input cost moves by seven dollars a barrel in a single day, any fixed retail level simply means someone else pays the difference. Here, that someone is the budget.
Who actually pays for the discount at the pump?
Excise is a fiscal instrument, not a retail promotion. Every 10 percent cut comes straight off the revenue side of the budget, and out of one of its most productive and most easily collected lines. Going from 10 to 20 percent roughly doubles the forgone revenue while the spending side stays where it was. The president himself conceded that his biggest concern is how the fuel price will be set on Friday and how much more budget revenue the state must give up.
The short-term effect is visible and politically rewarding: the driver at the pump does not feel the full weight of the move in quotations. Over the medium term, it is deferred payment. Revenue that does not reach the budget in July must either be found elsewhere or converted into a wider deficit. Neither option is free, and both are settled later, once the subject has left the front pages.
Gas as the second front
Alongside fuel, Vucic said gas reserves have never been at a lower level. That statement carries more weight in July than it would in January, because summer is when storage is filled ahead of the heating season, not drawn down. European gas passed 545 euros per 1,000 cubic metres at the same moment, which means reserves are being topped up at a price that is anything but favourable.
The two fronts meet. If fiscal room is spent holding down fuel prices now, less of it remains for energy intervention in the autumn, when heating bills become the story. Friday is the first date on which we will see how much of the promised 20 percent actually made it through the government, and at what cost.
Would you rather pay the market price for diesel now, or accept that the bill comes due through the budget in the autumn?
