Falling fuel prices and rising prices are leading countries around the world to burn coal, fuel food, shorten work weeks and tell citizens to stay home.
Fuel supplies have been reduced since the war against Iran led to the closure of the strait of Hormuz, which is an important route for transporting oil and gas from the sea. The deficit has prompted emergency measures as the government attempts to stop rising costs that have thrown the economy into chaos.
The International Energy Agency (IEA), whose members sought to calm markets by releasing 400m barrels of oil from their strategic reserves last month, called for actions such as flying less and driving slower.
Here’s how the world is responding as the Iran war oil crisis deepens.
United States
The US, which, along with Israel, attacked Iran in late February, has threatened further sanctions on Iran’s oil facilities that could prolong the war and raise fuel prices further. On Tuesday, Donald Trump angered allies who did not join the campaign – including the UK and France – by telling them to buy from the US first and then “go get their own oil” from the Gulf.
The federal government has not moved to increase subsidies or support struggling households, but continues its “drill, baby, drill” policy of expanding fossil fuel production while blocking renewable projects. Last week, the Trump administration announced that it will pay the French company TotalEnergies $1bn in tax money to kill plans to build windfarms on the east coast of the US, and instead direct the funds to oil and gas.
UK, Australia, New Zealand and Canada
The UK has urged people to remain calm as fuel prices rise, shrugging off calls to cut demand and cut back on subsidies for people who use oil to heat their homes. The chancellor, Rachel Reeves, is considering plans to inject more money into a council-run fund to help vulnerable people during the financial crisis, but has scrapped universal support given during the last energy crisis.
The IEA warned governments against providing blanket aid in response to the crisis and advised them to instead target support to those most in need. New Zealand has announced weekly cash payments to about 150,000 families in the “squeezed middle” as part of a relief package.
Australia introduced a 50% reduction in fuel prices for three months and released a national fuel security policy. In the current risk situation, it urges drivers to “buy only the fuel you need” and says the voluntary option will help avoid the impact of higher prices. Meanwhile, Canada has refused to step in to curb rising prices.
European Union
The EU has called for a rapid transition to a clean economy – driven largely by domestic renewables – although some member states are delaying it. Last week, Italy delayed its plan to phase out coal for more than a decade, while German Chancellor Friedrich Merz advocated keeping coal plants online for longer and called for accelerating the construction of gas-fired power plants. Many EU governments have announced fuel subsidies and tax cuts to protect consumers from rising prices.
On Wednesday, the European Commission proposed to weaken its carbon price by ending the cancellation of additional permits in the buffer pool. It has also promised to impose a lower tax on electricity than on fossil fuels, which will reduce dependence on imports by accelerating the shift away from petrol cars and gas boilers.
Dan Jørgensen, the EU’s energy commissioner, urged member states on Tuesday to save energy in line with the IEA’s recommendations. Many countries have been reluctant to impose tough measures to curb demand, but Slovenia has started offering fuel at the pump and Lithuania has halved domestic train ticket prices for the next two months.
Asia
Coal is returning across Asia, which has been hit hard by the energy crisis. India ordered coal plants to operate at full capacity and avoided planned shutdowns, while Japan allowed underperforming coal plants to return to the electricity market. South Korea has lifted electricity cuts from coal and announced a delay in its planned shutdown. Bangladesh, Thailand and the Philippines are also increasing electricity production from the dirtiest fuels.
China, the second largest country in the world, is less affected by the crisis than its neighbors. In recent years, it has increased energy production significantly – from fossil, nuclear and renewable sources – and has built a large strategic oil reserve. Its state-run refiners have avoided exporting Iranian crude oil for fear of being cut off from international markets, but independent “teapot” refiners have continued to use it for domestic consumption.
Countries in South and Southeast Asia have taken major steps to reduce energy demand. Sri Lanka introduced fuel rationing and a four-day work week. Vietnam has encouraged employers to let workers work from home. Thai dissidents took off their jackets in the air, as the government asked people to use less air conditioning and told officials to wear short-sleeved shirts without collars. It has also reduced the temperature in government offices to 26-27C and is joining other countries in the region in calls to drive less, use more public transport and encourage car sharing.
Africa
Many African countries are importers of refined oil products and a high proportion of the continent’s farmers mean they are particularly vulnerable to rising fertilizer prices, which have been hit by rising energy costs and a shortage of supplies from the Gulf.
Several countries have introduced emergency measures to deal with the outbreak. On Tuesday, South Africa reduced its fuel tax for one month. Tanzania ordered its energy ministry last month to boost its fuel stockpile policy, and has since established a new petrol price in Dar es Salaam. Ethiopia has introduced a special fuel subsidy and Zimbabwe is planning to increase the blending of fuel with ethanol. South Sudan has started to provide electricity to the capital, Juba, while Mauritius has blocked the power grid for non-essential use.
South America
Across South America, which has a long history of government-subsidized fuel, maritime governments have largely resisted calls to clamp down on price hikes. Chile’s new president, José Antonio Kast, raised gasoline prices just weeks after taking office to bring them in line with world prices. The government has announced relief measures, such as suspending public transport fares for a year.
On Wednesday, Argentina’s government delayed a planned increase in taxes on water, fuel and carbon dioxide. The move comes days after the administration of Javier Milei, the climate-denying president, said it would allow local firms to voluntarily blend up to 15% ethanol into gasoline.
Meanwhile, Brazil is partially protected against price gouging by a large fleet of vehicles that can run on any combination of ethanol and gasoline. Drivers can fill their tanks with ethanol from his sugar cane instead of relying on imported fuel.
Reuters and AP contributed to this report.
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