EU to increase fuel subsidies in response to Iran War Price Spikes

On Monday, the European Commission said that it wants countries to be able to release more public money to help companies with their fuel and fertiliser bills. This is because governments are racing to reduce the economic shock caused by the soaring price of fuel due to Iran's war.

Prices of oil rose by 6% on Monday to over $100 per barrel after the U.S. Military announced it would blockade ships departing Iran's ports. This sparked fears about prolonged disruptions in oil and gas shipments.

The Commission proposed on Monday that EU state aid regulations be changed to allow for more public spending in industries affected by the fuel price increases. These include agriculture, road transportation and shipping within Europe.

The change would allow governments to cover a portion of the increase in fuel and fertiliser prices that companies paid compared to the price before the U.S. - Israel war against Iran started on February 28, 2008.

The draft EU plan also increases, to over 50%, the maximum amount of aid that "energy-intensive industries" can receive to pay their electricity bills. Germany, Italy and Poland, as well as other European governments, have already introduced a number of funding measures, including fuel price caps and tax cuts, in an effort to limit the economic impact of the Iran War.

The Commission will adopt the final version of the EU proposals by the end this month, after receiving feedback from the governments.

The proposed changes are temporary and intended to deal with the energy 'fallout' of the Iran war.

The Commission checks that the state aid provided by national governments does not distort the competition on the EU single market. (Reporting and editing by Nick Zieminski, Kate Abnett)

(source: Reuters)