Global Fuel Subsidies More Than Double as Middle East Tensions Push Oil Prices Higher

The number of countries providing fuel subsidies to consumers has more than doubled as governments worldwide move to cushion the economic impact of surging energy prices. According to a Financial Times analysis of International Energy Agency data, 38 nations had subsidies in place at the start of September, a sharp increase from 16 four months earlier.

Governments Ramp Up Consumer Support

The interventions come as escalating conflict in the Middle East destabilizes energy markets, pushing the price of Brent crude to nearly $110 a barrel last week. In response, governments are increasingly turning to fiscal measures to ease the burden on households and businesses.

• The number of governments that have lowered energy taxes rose to 57 from 40 at the end of April.
• The total number of countries with some form of consumer energy support has grown from 56 to 94.
• France has extended support for high-mileage drivers, while Germany's government has promised imminent proposals to address high fuel costs.
• In the U.S., a proposal has been floated to suspend the 18.4 cents per gallon federal gasoline excise tax, though it would require congressional approval.

Ad

Rising Fiscal Pressure and Market Warnings

These widespread subsidies are compounding pressure on government finances at a time of rising borrowing costs. Last week, U.S. government borrowing costs hit their highest levels since 2007, driven by persistent inflation and rising central bank interest rates. On Friday, EU Economy Commissioner Valdis Dombrovskis warned member states about the "marked increase" in sovereign yields, urging them to "prioritise prudent fiscal policies."

The financial strain on consumers remains acute, underscoring the political pressure on governments to act. In the United States, average diesel prices reached nearly $6.45 a gallon on Friday, a 70% increase since the February 28 attacks on Iran, according to the motorist group AAA.