Should we resurrect 'TIPP flottante' if oil price booms again? Specific taxes as fuel consumer price stabilizers

- Few EU countries experimented fuel price stabilizers during oil price booms.
- Reacting to oil price variation, such stabilizers modify tax burden on fuel prices.
- We estimate a reduced form fuel price equation on a EU panel (1999-2012).
- Simulated stabilization mechanisms seem able to counteract oil price increases.
- However, such mechanisms have a direct relevant impact on public budgets.

As an answer to soaring oil prices, stabilization mechanisms based on specific taxes, such as the French 'TIPP flottante', have been discussed and introduced in some countries in early 2000s, but then soon abandoned. Our contribution aims at analyzing the excise pass-through and the cost shifting in a comprehensive European context to understand whether such a mechanism could actually reach its target. Our results show that, on average, fuel tax reductions are effective in stabilize consumer price, but the measure is particularly costly for public budgets.