38 countries now subsidizing fuel as energy crisis widens

The number of countries providing direct fuel subsidies to consumers has surged to 38, more than doubling in four months from 16, according to an analysis of International Energy Agency data published Monday by the Financial Times. The expansion underscores the growing fiscal burden governments face as the Middle East conflict continues to disrupt global energy markets, with Brent crude trading above $100 per barrel and European energy inventories at historic lows ahead of winter.iea+1

A Broadening Fiscal Response

The IEA has been tracking government responses to the energy crisis through a dedicated policy tracker, cataloguing measures ranging from fuel subsidies and tax reductions to income-targeted supports and demand-side conservation programs. The rapid expansion in direct fuel subsidies reflects the severity of the price shock: Brent crude approached $110 per barrel in recent weeks, and diesel prices in the United States topped $6.50 per gallon for the first time. Refined product markets have been hit even harder than crude, with U.S. diesel surpassing the $200-per-barrel mark in early September, 94% above pre-war levels, according to the IEA's September Oil Market Report.iea+3

Treasury Secretary Scott Bessent has linked the spike in borrowing costs directly to the energy shock. "The interest rates — this is the highest correlation they've ever had to the oil price," Bessent said in a recent interview. "The Iran conflict will end, interest rates and the spike in headline inflation will come down." The Federal Reserve raised its benchmark rate to a range of 3.75 to 4%, while the 10-year Treasury yield has hovered near 5%.nytimes+1

Coal Demand Hits Record as Hormuz Disruptions Persist

The Strait of Hormuz crisis is also reshaping the global fuel mix. The IEA's mid-year coal update forecast that global coal demand would rise 1.2% in 2026 to a record 8.94 billion metric tonnes, as countries from Japan to Bangladesh turn to coal to compensate for constrained LNG supplies. China's coal consumption is expected to rise 1% to 5 billion tonnes, while India's is forecast to jump 4.2% to 1.353 billion tonnes.finance.yahoo+2

The shift comes despite international climate pledges. Italy has postponed coal plant closures by 13 years, and Germany has considered restarting shuttered plants. Chancellor Friedrich Merz said in March, "I am not prepared to jeopardise the core of our industry simply because we have adopted phase-out plans that have become unrealistic."finance.yahoo

Winter Looms Over Europe

European natural gas storage stood at roughly 61% full as of mid-August, the lowest level for that date in records going back to 2009 and well below the roughly 82% five-year seasonal average. CNBC reported EU gas stores at about 63% — roughly 18 percentage points below the five-year norm — with analysts warning that prices may need to exceed 100 euros per megawatt-hour to attract enough LNG away from Asian buyers. Reuters noted that Europe appears likely to enter winter with gas inventories well below the bloc's targeted 80% storage level.eprinc+2

Diplomatic developments offered a glimmer of relief on Monday, as Brent crude declined to around $102, pressured by reports that messages were being exchanged between the U.S. and Iran ahead of the United Nations General Assembly. But with oil shipments through Hormuz still far below normal and Europe's energy buffers dangerously thin, the fiscal toll of fuel subsidies shows no sign of easing.tradingeconomics