The reduction of the excise tax rate on diesel fuel, which was in effect from early April to the end of June, did allow consumers to save money; however, the tax reduction only partially reflected in the prices at gas stations. This was reported by the Competition Authority.
The Competition Authority conducted an in-depth analysis of the fuel and autogas market in response to the sharp rise in fuel prices in the second quarter of 2026, the impact of the geopolitical situation in the Middle East, and numerous complaints from residents regarding the increase in fuel prices.
Price increase explained by procurement costs
According to the study, the rise in the price of AI-95 gasoline and diesel fuel was primarily caused by the increase in procurement prices on the global market. At the same time, there were no signs that retail networks significantly increased their own markup.
In the case of gasoline, the average retail markup even decreased – from 11.1 euro cents per liter in January to 7 euro cents in May. This indicates that part of the increase in procurement prices was compensated by sellers from their own profits. In June, after the decrease in procurement prices, the cost of gasoline at gas stations also decreased, and the markup level returned to approximately January values.
As for diesel fuel, the markup remained relatively stable during the study period – from 6.6 to 8.9 euro cents per liter. During the peak increase in procurement prices, it decreased – from 7.7 euro cents in January to 6.6 euro cents in March, which also indicates partial absorption of cost increases by the sellers themselves.
Excise tax reduced, but prices did not fall completely
From April 1, 2026, the excise tax rate on diesel fuel was temporarily reduced in Latvia. It was expected that this would lead to a decrease in diesel prices by approximately 8.6 euro cents per liter (including VAT).
However, the analysis conducted by the Competition Authority showed that the actual price reduction on the information boards of gas stations averaged 4.95 euro cents per liter. This means that only about 58% of the tax reduction reached the end consumers.
The most noticeable price decrease was observed in the first week after the excise tax reduction. Then the effect weakened and stabilized at around 4.52 euro cents per liter, which corresponds to about 53% of the expected reduction.
To verify the results, the Competition Authority also used the econometric model Synthetic Difference-in-Differences, comparing the price dynamics in Latvia with an artificially formed control group of EU countries where excise changes did not occur. This methodology showed a similar result – 61–64% of the tax reduction was passed on to final prices.
This does not indicate an increase in gas station profits
The Competition Authority emphasizes that the incomplete transfer of the excise reduction to prices does not in itself indicate inflated markups by traders. Available data shows that markups remained generally stable.
Moreover, part of the tax benefit may have been provided to consumers in the form of additional discounts through discount cards and loyalty programs, which were not separately analyzed in this study.
Prices in Latvia rose similarly to other Baltic countries
A comparison of average gasoline and diesel prices excluding taxes showed that from January to July 2026, the price dynamics in Latvia closely matched the situation in Lithuania, Estonia, and the average across the European Union.
In all countries, there was a sharp increase in fuel prices in March, followed by price stabilization, a decrease in June, and another increase at the end of July.
What is happening with autogas prices
The study of the liquefied petroleum gas (LPG) market also showed that the main reasons for the price increase were rising procurement costs, fluctuations in energy resource prices, the tense situation in the Strait of Hormuz, oil supply restrictions, increased transportation and logistics costs, and changes in the euro to dollar exchange rate.
At the same time, the tax burden on autogas in Latvia remains higher than in Estonia but slightly lower than in Lithuania. The excise tax rates are as follows: Estonia – 193 euros per ton; Latvia – 343 euros per ton; Lithuania – 370.9 euros per ton.
In addition to excise and VAT, the cost of autogas in Latvia also includes a fee for maintaining state reserves of petroleum products – 81.26 euros per 1000 kg.
Inspections will continue
The Competition Authority intends to continue monitoring the fuel and LPG markets until the end of 2026. In the future, the dynamics of retail markups, the impact of the excise reduction on diesel fuel prices, the wholesale fuel market, and the completion of the autogas market study will be analyzed.
The final report on the situation in the fuel market is planned to be published in February 2027.
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