Latvia Prepares an April Brake on Fuel Prices, Excise Cut and Windfall Tax on Retailers Could Cap Pump Prices at €1.80 a Litre
Riga is pulling two levers at once. On one side, the government wants to cut excise duty on petrol and diesel for a limited period. On the other, it plans to skim off the extra margin that retailers might be making from a geopolitical shock, using a special tax on windfall profits. At a cabinet discussion on 17 March 2026, ministers set out a simple goal: keep pump prices below €1.80 a litre and get the measures in place by April.
The timing makes sense. Oil markets reacted sharply in March as the war in the Middle East escalated. Brent closed at $100.46 a barrel on 12 March and $103.42 on 17 March, while disruption in the Strait of Hormuz kept alive fears that supply pressure would not fade quickly. For a small, open economy, this is exactly the kind of external shock that pushes governments into tax policy at speed.
Latvia’s problem is politically awkward for another reason. The state raised fuel excise rates itself on 1 January 2026. According to Finance Ministry figures, petrol duty rose from €532 to €555 per 1,000 litres and diesel from €440.5 to €467, which added about 2.3 cents and 2.65 cents a litre respectively before the rest of the pricing chain took its cut. Annual inflation slowed to 2.3 per cent in February, but that figure came before the full March fuel shock filtered through to consumer prices. The government is now trying to reverse part of its own earlier tax pressure before transport costs trigger a fresh inflation wave.
Diesel, not petrol, is the real political battleground
The €1.80 threshold is, in practice, a defensive line for diesel rather than petrol. Figures compiled from the European Commission’s weekly bulletin showed that on 9 March, 95 petrol in Latvia averaged €1.633 a litre and diesel €1.793. Price monitoring on 16 March put petrol at around €1.68 and diesel at roughly €1.93. In other words, the government is not really fighting the price of regular petrol. It is trying to stop diesel running away before the increase spreads into logistics, services and the final price of goods.
Economically, an excise cut is a quick but blunt instrument. It is still simpler and cheaper than a direct price cap, and part of the loss to the budget can be clawed back through VAT. That is precisely why Riga wants to pair the excise cut with a separate windfall tax formula. The government clearly suspects that not all of the global price pressure reached consumers honestly or symmetrically at the pump.
That is where the real implementation risk sits. If the formula does not distinguish clearly enough between stock purchase prices, wholesale delays and the retailer’s actual margin, the measure could squeeze smaller market players harder than the big chains. At the same time, Latvia does not face a physical supply problem, according to the minister. The dispute, for now, is about pricing rather than availability.
A familiar European response to an imported shock
Latvia is not acting in isolation. Austria said on 18 March that it too would introduce a temporary fuel tax cut and limits on retail margins, while Reuters gathered examples from a range of countries trying to soften the jump in energy costs through taxes, subsidies or market intervention. Riga’s approach fits neatly into that wider European crisis management pattern. Governments are buying time, trying to drag a global shock back into a politically tolerable range at home.
The strength of Latvia’s plan lies in its speed. Its weakness is more awkward and more obvious. No tax measure, however clever, can do much about the oil price on world markets.
