Europe Pays $231 Million a Day Extra for Diesel as Fuel Prices Hit $12 a Gallon

EU consumers are spending an extra 203 million euros ($231 million) a day on diesel alone as pump prices surpass the equivalent of $12 a gallon in parts of Europe, according to the advocacy organization Transport & Environment.

Wars in the Middle East and Ukraine have pushed governments across the continent into a scramble of subsidies, tax cuts and emergency policy revisions to shield their economies and increasingly angry citizens from record gasoline and diesel prices, 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.

The responses are fragmented and often improvised. Lithuania cut train ticket prices in half. Greece is taxing gambling more to fund public relief. Italy delayed the scheduled demolition of coal-fired power plants and slashed paperwork requirements 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.

The bloc's exposure is structural. The EU imports nearly all of the oil it uses and 85% of its natural gas, according to the EU's statistical office. Imports cover 57% of the bloc's overall energy needs, with much of its domestic production coming from renewable and nuclear sources. Before the United States and Israel attacked Iran, Russia's war in Ukraine had already disrupted global energy supplies and caused turmoil across Europe.

"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 Transport & Environment, said.

Brussels loosens the rules

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: 450 million euros and troops in Saudi Arabia

France announced a 450 million-euro ($512 million) relief package on Tuesday. 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, making 5.5 million workers eligible for 100-euro ($113) payments to defray fuel costs through the end of the year, the government said.

The 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 winter energy bills.

President Emmanuel Macron has asked von der Leyen to relax EU fuel quality regulations on density, sulfur content and other criteria to help increase diesel and kerosene production in Europe — a step the EU took 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 from 7% to 10%.

On Thursday, Macron told French broadcasters he would deploy French troops, radars and defensive systems to Saudi Arabia to protect energy infrastructure from attacks by Iran-backed Houthi rebels 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 taxes

Germany renewed a fuel tax cut last week after a two-month round expired at the end of June. The reduction, running from Oct. 1 until the end of the year, will lower gasoline and diesel prices by 17 cents per liter at a cost of 2.5 billion euros, the government said. Berlin will also hold talks with the oil industry about introducing a fuel price cap by Jan. 1. Belgium and Luxembourg have had similar caps for decades.

Spain extended gasoline and diesel tax cuts introduced in March as part of a 5 billion-euro ($5.7 billion) package to counter the Iran war's effects on local energy prices. The break amounts to 5 cents per liter this month; an automatic mechanism would raise it to 20 cents per liter if fuel-price inflation exceeds 15% year-on-year. Madrid also extended subsidies for transportation companies, farmers, livestock producers and fishermen.

The US dependency problem

EU nations have tapped strategic reserves under an agreement by the International Energy Agency's 32 member countries to release 400 million barrels of oil from emergency stockpiles. Macron said Thursday he would rally G7 nations to release more fuel too.

The deeper shift is geographic. As the EU weaned itself off Russian energy, it became more dependent on the United States — especially for diesel. Von der Leyen personally struck a deal with President Donald Trump last year that committed the EU to buying $750 billion worth of American energy over three years.

That relationship now carries a new risk. Trump expressed support this week for banning diesel exports to drive down U.S. prices, a move that would force the bloc to find alternative sources of the fuel. Brussels is lobbying Washington to drop the idea.

"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."

Von der Leyen said greater electrification could cut the EU's annual bill for imported oil, gas and other fossil fuels by 260 billion euros ($296.6 billion) by 2040. Until then, Europe's fuel bills — and its subsidy programs — will likely keep growing.