The latest fuel price shock triggered by the conflict in Iran is a reminder of a simple rule: geopolitical disruptions are first and foremost reflected in energy prices. We saw this at the onset of the war in Ukraine, when it took nearly a year for fuel prices to stabilize.
As fuel prices rise, governments typically collect higher tax revenues. This creates an opportunity to channel additional funds toward the most vulnerable sectors of the economy. Market participants, in turn, have clear expectations: governments should not hesitate, but act decisively to support those industries most affected primarily those for which fuel represents a significant share of costs.
Today, Europe is once again divided into two camps. Some countries are reducing prices in their domestic markets quickly, decisively, and in some cases even aggressively. Others are observing, analyzing, and weighing their options. So far, Lithuania has chosen a more measured approach.
How have other European countries responded?
Most governments are opting for measures that deliver the fastest relief to consumers namely, reductions in excise duties and VAT on fuel.
Italy, Portugal, Austria, Slovenia, and Hungary were among the first to act by cutting excise duties, with Italy temporarily reducing them by as much as 30%. Spain went even further: in addition to lowering excise duties, it reduced VAT from 21% to 10% and introduced a targeted subsidy of €0.20 per litre for the most affected sectors.
Some countries have opted for indirect measures. Hungary and Slovakia introduced price caps, this time learning from past mistakes these caps apply only to domestic consumers, helping to avoid fuel tourism and shortages.
Romania allows transport companies registered in the country to reclaim part of the excise duty paid into the state budget until the end of this year, easing the burden on its carriers.
Poland has adopted a combined model: it reduced VAT from 23% to 8%, lowered excise duties, and introduced price caps. The result is among the lowest fuel prices in Central Europe.
In the countries that reacted most swiftly Poland, Spain, and Slovenia fuel prices have already fallen below €2 per litre. Moreover, these countries generally do not restrict fuel purchases by foreign vehicles, further increasing their attractiveness.
International carriers are not receiving sufficient support
The key question is how prepared Lithuania is to support its economy and where these efforts are being directed.
Lithuania has announced plans to suspend a previously scheduled increase in fuel excise duties starting next year. In addition, on April 14, a decision was adopted to reduce the fixed component of excise duty on diesel from €500 to €450 per 1,000 litres.
This is a positive step for domestically operating businesses, as it directly reduces fuel-related costs and contributes to price stability. However, it is insufficient for international carriers. Even after a 6-cent reduction in retail diesel prices, fuel in Poland remains approximately 15% cheaper.
Due to uncompetitive pricing, Lithuania is steadily losing its attractiveness to international carriers. Already last year, following an increase in excise duties and rising fuel prices, companies began seeking alternatives and refuelling in neighbouring countries. Data from Edenred Finance, a company providing VAT refund services to transport firms, shows that last year VAT refunds on fuel from Poland to Lithuanian and Latvian carriers increased by 46% compared to 2024. Meanwhile, Latvian carriers significantly reduced refuelling in Lithuania the volume of VAT refunds from Lithuania dropped by more than 90%.
The latest measures introduced in Lithuania are unlikely to change the behaviour of international carriers, as neighbouring countries have adopted far more decisive policies. As a result, fuel price disparities across the region remain substantial an essential factor shaping where fuel is purchased.
At the same time, it is important to emphasize that one of Lithuania’s key service export sectors international road freight transport accounts for a significant share of the country’s GDP. Yet the sector currently lacks targeted, tailored measures that would help strengthen its competitiveness.
Commentary by Loreta Augulytė, CEO of Edenred Finance