"The oil price has plunged by 50 percent, so it's become cheaper to fill up at the pump. That's one thing. The other is that we are in a government with the Green Party," Social Democratic Finance Minister Magdalena Andersson told reporters at a press conference.
"We need to finance our reforms krona for krona. And that means we need to increase revenues," she said.
The government proposed to increase the tax on petrol by 0.44 kronor ($0.05) per litre and on diesel by 0.48 kronor.
The hike, which would take effect on January 1st, would bring in 4.1 billion kronor ($479 million) to state coffers in 2016.
The proposal is part of the government's spring budget bill to be presented to parliament in April.
It is however uncertain whether the measure will be adopted, given that the government represents a minority in the assembly and depends on the opposition's support or abstention.
The head of the main opposition party, the centre-right Moderates, Anna Kinberg Batra, has already expressed opposition to the plan.
"Government proposes heavy tax hikes for households, transport and business — how does that make Sweden stronger or create jobs?," she tweeted.
Kraftiga skattehöjningar på hushåll, transporter och företag föreslår regeringen – hur bygger det Sverige starkare el gör jobben fler?#svpol
— Anna Kinberg Batra (@KinbergBatra) March 27, 2015
The previous centre-right government had in 2009 said it wanted Sweden's car fleet to be entirely fossil fuel-free by 2030.
Experts have meanwhile said that goal will be impossible to reach without very restrictive measures, such as prohibitively priced petrol, and the left-wing government in power since October has not adopted the previous government's date as its target.
On August 1st the government will also start the process of rolling back a reform introduced by the previous centre-right government which made it cheaper for employers to take on young people.
By shedding this employers’ fee reduction the government expects to bring in 5.5 billion kronor this year alone.
The government said it would take more steps to remove its predecessors' reform next year, leading to 15.8 billion kronor in increased revenue. This figure is expected to rise to 18 billion kronor in 2017 and 2018.
A controversial household services deduction known as RUT will be slashed in half to a maximum 25,000 kronor for under-65s. Anyone paying for homework assistance will no longer be entitled to claim for the deduction.
The government also reiterated that it would cut the deduction for home renovations, or ROT, from 50 to 30 percent of the cost.
Other plans include higher taxes on investment savings accounts and capital growth plans.
Defending the proposed tax increases, the finance minister said, citing schools, infrastructure, homes and climate measures: “We need to invest more in Sweden than we are doing today and we need to prepare Sweden for the future."