Europe uses subsidies, taxes and policy pauses to offset pain of high
fuel prices
[September 25, 2026] By
SAM McNEIL
BRUSSELS (AP) — Wars in the Middle East and Ukraine are driving
governments across Europe to craft subsidies, taxes and policy revisions
that might shield their economies, companies and increasingly aggrieved
citizens from record gasoline and diesel prices.
Countries around the world have intervened to limit the economic impact
of diminished energy supplies and soaring fuel prices since the start of
the Iran war, according to the Organization for Economic Cooperation and
Development. Seven of the 10 nations working most actively to contain
the economic damage are in the European Union, the OECD said in a report
published Wednesday.
Lithuania cut train ticket prices in half. Greece is taxing gambling
more to fund public relief efforts. Italy delayed the scheduled
demolition of coal-fired power plants and slashed the required paperwork
for oil and natural gas projects. The Netherlands increased funding for
a program that provides free energy-saving services in homes. Poland has
proposed heavily taxing the record profits of certain fuel producers and
sellers.
Before the United States and Israel attacked Iran, Russia’s war in
Ukraine disrupted global energy supplies and caused turmoil in Europe.
The EU imports nearly all of the oil it uses and 85% of its natural gas.
Overall, imports supply 57% of the bloc’s energy needs, with much of its
domestically produced energy coming from renewable and nuclear sources,
according to the EU's statistical office.
Europeans are becoming more incensed as pump prices surpass the
equivalent of $12 a gallon in some countries. EU citizens are spending
an extra 203 million euros ($231 million) a day just for diesel fuel,
according to the European advocacy organization Transport & Environment.
“It’s a cruel irony that the U.S. is the least vulnerable to a crisis of
its own making, while Europe’s economy again takes the hit,” Antony
Froggatt, an analyst at the organization, said.
Some European governments are spending billions to help their countries
weather the current energy crisis.
EU leaders in Brussels gave member nations temporary discretion to
provide state aid to households and energy-intensive industries like
agriculture, transportation and fishing. They also offered limited
leeway from EU spending rules for investments that strengthen energy
security and reduce the bloc's long-term reliance on imported oil and
natural gas.
“The pressures from higher energy prices and borrowing costs are biting
for people and for businesses,” European Commission President Ursula von
der Leyen said in her annual State of the European Union address last
week. “We need to double down on our affordable, homegrown, clean
energy, be it renewables and nuclear, or biomethane and others” to “give
us independence and drive down energy prices.”
France rolls out diesel subsidies and a Red Sea mission
France has adopted an expanding array of targeted measures to cushion
consumers and fuel-intensive businesses from higher prices.
The French government on Tuesday announced a 450 million-euro ($512
million) package to expand its relief measures. It broadened
means-tested aid for people who drive more than 30 kilometers (18 miles)
round trip to work or more than 8,000 kilometers (4,900 miles) annually
for professional purposes. The expansion makes 5.5 million workers
eligible for 100-euro ($113) payments to defray fuel costs through the
end of the year, the government said.
The new package also extended fuel subsidies for farmers, fishermen and
construction companies until the end of the year, and will make energy
vouchers of 48 euros to 277 euros available three months early to help
5.8 million families pay their winter energy bills.
French President Emmanuel Macron has asked von der Leyen to promote a
relaxation of EU fuel quality regulations on density, sulfur content and
other criteria to help increase diesel and kerosene production in
Europe. The EU took a similar step during the COVID-19 pandemic.
In a letter to the EU executive seen by The Associated Press, Macron
warned that the global oil market would soon see “strong increases in
prices” if the Strait of Hormuz off Iran's coast did not reopen to
tanker traffic and Saudi Arabia's East-West pipeline to the Red Sea was
not repaired.
He also called for raising the EU limit on conventional biodiesel
content in standard diesel fuel from 7% to 10%.
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Gas prices are displayed at a gas station in Frankfurt, Germany,
Monday, Sept. 14, 2026. (AP Photo/Michael Probst, File)
 On Thursday, Macron said in an
interview with French broadcasters that he would deploy French
troops, radars and defensive systems to Saudi Arabia to help protect
energy infrastructure from attacks by Iran-backed Houthi rebels who
have seized new territory near the Bab al-Mandab, a key chokepoint
in the global economy. "We are putting ourselves in a position to
protect this site because a few weeks ago more than 5 million
barrels came out of this site every day,” he said, referring to an
export terminal in Yanbu on the Red Sea for the Saudi East-West
pipeline.
Germany and Spain cut fuel taxes to give motorists some breathing
room
A two-month round of fuel tax cuts in Germany expired at the end of
June. The government agreed last week to renew the tax cuts, which
will lower gasoline and diesel prices by 17 cents per liter, from
Oct. 1 until the end of the year. The German government said the new
reduction will cost 2.5 billion euros.
The government also said it would hold talks with the oil industry
about introducing a fuel price cap by Jan. 1. Neighboring Belgium
and Luxembourg have had similar price caps in place for decades.
Spain's government also extended gasoline and diesel tax cuts it
introduced in March as part of a 5 billion-euro ($5.7 billion)
package to counter the effects of the Iran war on local energy
prices.
The tax break amounted to 5 cents per liter this month. An automatic
mechanism would increase it to 20 cents per liter if fuel-price
inflation exceeds 15% year-on-year.
The government also extended fuel subsidies for transportation
companies, farmers, livestock producers and fishermen.
The US has become one of the EU's most important energy suppliers
Alongside national relief programs, EU nations have tapped their
strategic reserves as part of an agreement by the International
Energy Agency's 32 member countries to make 400 million barrels of
oil from their emergency stockpiles available to the market. Macron
has said Thursday he would rally G7 nations to release more fuel,
too.
The EU has worked to reduce its reliance on energy imported from
Russia through renewable energy production and converting systems
and industries to run on electricity instead of fossil fuels.
Von der Leyen said greater electrification could reduce the EU's
annual bill for imported oil, gas and other fossil fuels by 260
billion euros ($296.6 billion) by 2040.
As the EU tried to wean itself off Russian energy, it became more
dependent on the United States. Von der Leyen personally struck a
deal with President Donald Trump last year that included a
commitment for the EU to buy $750 billion worth of American energy
over three years.
The Iran war has made the relationship both more vital and more
complicated for the EU, which has increasingly turned to the U.S.
for diesel. The support Trump expressed this week for banning diesel
exports to drive down U.S. prices worries the bloc, which would have
to find alternative sources of the fuel.
Brussels is lobbying Washington to drop the idea of suspending
overseas diesel sales.
“We believe this is a bad idea,” European Commission spokesperson
Olof Gill said Thursday. “EU-U.S. cooperation in the field of energy
is strong, stable and mutually beneficial. Any disruption would risk
negatively impacting both sides.”
___
Associated Press writers Geir Moulson in Berlin, John Leicester in
Paris and Suman Naishadham in Madrid contributed to this report.
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