The French government has announced that it will temporarily lift a ban on retailers selling road fuel below cost in an effort to stem inflationary pressures on households. The move comes as fuel prices have surged in recent months, driven by high oil prices and the war in Ukraine.
Prime Minister Elisabeth Borne said that the ban would be lifted for “several months” and that it was an “unprecedented measure” designed to “obtain tangible results for the French people, without subsidising fuel.”
The third-largest service station operator in France, TotalEnergies, made the announcement on Tuesday morning that it would be extending its €1.99 per litre fuel price restriction.
The restriction prevents fuel prices at its filling stations from exceeding €1.99 per litre; at the time of writing, the average litre price for gasoline is €1.96 and for diesel is €1.92.
The ban on selling fuel below cost has been in place since 1963 and is designed to protect retailers from predatory pricing and to ensure that consumers have access to fair prices. However, the government has argued that the ban is no longer necessary in the current context of high fuel prices.
A price ceiling is the maximum allowed amount that a seller can charge for a product or service. In general, price ceilings established by law apply to basic goods, such as food and energy products, as a rule, when the goods become affordable for the average consumer.
A price cap is essentially a form of price control. Price ceilings can be an advantage because basic goods are at least temporarily cheap. However, economists question how useful such ceilings are in the long run.
The new decision by the French government is a reaction to present reality of inflation faced globally due to the ongoing war in ukraine.
The move to allow fuel retailers to sell below cost is part of a broader package of measures that the French government has announced to help households cope with inflation. The package also includes a one-off payment to low-income households and a cap on energy prices.
It remains to be seen how effective the government’s measures will be in tackling inflation.
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