Diesel excise cut: only part of the benefit reached Latvian consumers
An analysis by Latvia’s Competition Council shows that a temporary diesel excise duty reduction from April to June lowered pump prices by an average of 4.95 cents per litre, or about 58% of the planned cut. Fuel price growth in the first half of 2026 was mostly driven by higher procurement costs, not retailer margins.
Latvia’s Competition Council (KP) has presented its findings on the fuel market in the first half of 2026, including an assessment of the temporary diesel excise duty cut introduced on 1 April. According to the council, higher wholesale procurement prices rather than bigger retail margins were the main reason behind petrol and diesel price rises.
The council said retail margins for 95-grade petrol declined from an average of €0.111 per litre in January to €0.07 in May, before returning to roughly January levels in June. Diesel margins remained relatively stable, ranging from €0.066 to €0.089 per litre. In periods when procurement prices were higher, retailers partly absorbed the increases in their margins, KP noted.
The excise duty reduction was expected to lower diesel prices by around 8.6 cents per litre including VAT. KP’s calculations show that during the reduction period, pump prices excluding discounts were on average 4.95 cents lower than they would have been without the measure, corresponding to a pass-through rate of about 58%. In the first week the effect was stronger, then stabilised from 6 April at about 4.52 cents, or 53%. A separate synthetic difference-in-differences model using a control group of EU countries produced a pass-through estimate of 61–64%.
KP stressed that an incomplete pass-through does not automatically mean retailers increased their margins. Available data suggest margins were broadly stable, so part of the benefit may have appeared in the form of discounts.
Comparisons across the Baltic states and the EU showed similar price dynamics between January and July, with a sharp rise in March, stabilisation in June and another increase in late July. For autogas (LPG), price changes were attributed to procurement costs, geopolitical tensions around the Strait of Hormuz, supply restrictions, logistics costs and currency fluctuations. Latvia’s fiscal burden on LPG is higher than in Estonia and Lithuania: the excise rate is €343 per tonne in Latvia, compared with €193 in Estonia and €370.9 in Lithuania. Latvia also applies a security reserve fee of €81.26 per 1,000 kg, while Estonia and Lithuania have different arrangements.
KP will continue monitoring the fuel and LPG market until the end of 2026, with a final report planned for February 2027.
