EU to increase fuel subsidies to cope with rising prices

The European Commission announced that it wants to allow countries to allocate more public funds to help businesses pay fuel and fertilizer bills, as governments rush to mitigate the economic effects of rising prices due to the war in Iran.

Oil prices jumped about 6% to exceed $100 per barrel on Monday after the US military announced a blockade on ships entering and leaving Iran, raising fears of prolonged disruptions to oil and gas shipments.

As part of a broader package of measures that Brussels is preparing in response to rising energy prices, the Commission proposed on Monday to change EU state aid rules to allow more public spending for industries severely hit by higher fuel prices, including agriculture, road transport, and intra-European shipping.

These changes would allow governments to cover part of the price increases that companies paid for fuel or fertilizers compared to prices before the start of the US-Israeli war on Iran on February 28.

The EU's draft plan includes raising the maximum share of aid that energy-intensive industries can receive to help pay electricity bills to more than 50%.

European governments, including Germany, Italy, Poland, and Hungary, have already taken a series of financing measures, including fuel price caps and tax cuts, in an attempt to contain the economic fallout from the war against Iran.

Governments will submit their comments on the EU's proposals before the Commission adopts a final version by the end of the month.

The proposed changes will be temporary and will apply exceptionally to address the energy-related consequences of the war against Iran.

The Commission is keen to review state aid that countries provide domestically to ensure it does not undermine the principle of competition in the EU's single market.