Europe Deploys Subsidies and Tax Cuts to Blunt Record Fuel Prices

European governments are turning to subsidies, tax relief and regulatory pauses to protect households and businesses from fuel prices that have climbed to record levels, as wars in Ukraine and the Middle East strain global energy supplies.

Seven of the ten countries doing the most to limit the economic fallout are European Union members, the Organization for Economic Cooperation and Development said in a report published Wednesday. The interventions range from halving train fares in Lithuania to taxing gambling in Greece to fund relief, delaying coal plant closures in Italy and proposing windfall levies on fuel producers in Poland.

The pressure is acute because the bloc imports nearly all its oil and 85 percent of its natural gas, with imports meeting 57 percent of its overall energy needs. Pump prices have exceeded the equivalent of $12 a gallon in some countries, and EU citizens are spending an extra 203 million euros ($231 million) a day on diesel alone, according to the advocacy group Transport & Environment.

EU leaders in Brussels have given member states temporary room to offer state aid to households and energy-intensive sectors such as agriculture, transport and fishing, along with limited flexibility from spending rules for investments in energy security.

France announced a 450 million-euro expansion of relief measures on Tuesday, widening means-tested aid to 5.5 million workers who drive long distances, extending fuel subsidies for farmers, fishermen and construction firms, and releasing winter energy vouchers of 48 to 277 euros three months early for 5.8 million families. President Emmanuel Macron has asked the European Commission to relax fuel quality rules to boost diesel and kerosene output and to raise the allowed biodiesel blend in standard diesel from 7 to 10 percent.

Germany let a two-month fuel tax cut lapse at the end of June but agreed last week to reinstate it from October 1 through year-end, lowering pump prices by 17 cents a liter at a cost of 2.5 billion euros. Berlin also plans talks with the oil industry on a possible price cap by January 1, similar to long-standing caps in Belgium and Luxembourg. Spain has extended tax cuts introduced in March under a 5 billion-euro package, with the break rising automatically from 5 cents to 20 cents a liter if fuel-price inflation exceeds 15 percent year-on-year, alongside continued subsidies for transport firms, farmers and fishermen.

EU nations have also tapped strategic reserves under an International Energy Agency agreement to release 400 million barrels. Commission President Ursula von der Leyen said greater electrification could cut the bloc's annual fossil fuel import bill by 260 billion euros by 2040. The bloc's growing reliance on U.S. diesel has been complicated by Washington's consideration of restricting overseas sales, a move Brussels is lobbying against.