Excise duty: the fixed tax behind every fuel price
Excise duty is a fixed tax per litre or gallon of fuel, charged before VAT. Unlike VAT it does not change with the price of fuel, so it can be a large share of the total when pre-tax prices are low, and a smaller share when they are high.
In this entry
What excise duty is
Excise duty, also called fuel duty or a fuel tax, is a fixed charge a government adds to every litre or gallon of fuel sold. It is set as an amount of money, not a percentage, so a government decides the number directly rather than letting it track the market price.
It exists mostly to raise revenue and, in many countries, to fund roads or discourage fuel use. It is charged before any sales tax, and it applies whether the pre-tax price of fuel is high or low.
Excise duty compared with VAT
Excise duty and value-added tax (VAT) both add to the price at the pump, but they behave differently.
Excise duty compared with VAT
How it fits into the pump price
Every pump price is built from three parts: the pre-tax cost (crude oil, refining and distribution), excise duty, and VAT charged on top of both.
Order matters: VAT is usually charged on the price after duty is added, so it taxes the duty too.
How much of the price is tax
How much tax makes up the price varies enormously by country. In much of Western Europe, duty and VAT together can be well over half the pump price. In the United States, federal and state fuel taxes are a small share, and most of the price is the pre-tax cost. Figures below are illustrative.
Where duty tends to be high or low
Duty rates are set by national policy, so neighbouring countries can differ sharply even when the pre-tax cost of fuel is almost identical, which is part of why cross-border price gaps exist.
How this shows up on FuelTheGuide
We don't break the price into duty, VAT and pre-tax cost ourselves, since that split isn't part of the national average price data we use. What we do show is the total price you'd pay, so a country with high duty will simply show a higher number.
If a country's price stays flat for weeks even while its neighbours move, a duty or VAT change, or a government-fixed price, is often the reason. We flag fixed prices separately so you can tell the two apart.
See the government-fixed price label in the explorer →Questions and answers
Is excise duty the same everywhere in a country?
Not always. Some countries, including the United States, layer a federal duty with a separate state or local duty, so the total varies by region even though the fuel is the same. The US Energy Information Administration publishes weekly pump price data that reflects this regional variation.
Does excise duty change often?
Rarely, compared with the crude oil price. Most governments set it once a year or less. When it does change it is usually a budget decision, not a response to oil markets.
Why does a price cut from lower oil prices not fully reach the pump?
Because excise duty is fixed and VAT is charged on the total including duty, a drop in the pre-tax price reduces VAT by a small percentage but leaves excise duty untouched. The tax floor means pump prices fall by less than the crude price.
Do electric vehicles pay an equivalent of fuel duty?
Generally no, though several countries are introducing road-use charges or electricity levies to replace lost fuel duty revenue as EV adoption grows. The ITF/OECD has published research on road-user charges for EVs as governments seek to maintain transport revenue.
Sources and further reading
- Excise duty tables for mineral oils European Commission, Taxation and Customs Union, taxation-customs.ec.europa.eu
- Motor fuel taxes by state US Energy Information Administration, eia.gov
- Fuel prices tool and price composition OpenVan.camp, openvan.camp/compare/fuels/prices