World fossil-fuel subsidies could exceed $1 trillion in 2026 as governments expend greater to safeguard households and businesses from rising energy costs triggered by the crisis in the Middle East.
The projection was contained in the United Nations Development Programme’s September 2026 policy concise, From Shock to Resilience: Protecting development gains amid compounding crises, produced including the United Nations Development Oversight Office.
The status said disruptions to energy markets and large shipping routes have pushed crude oil and other commodity prices increased, increasing the fiscal charge of fuel subsidies, price caps and tax reductions being deployed by governments to cushion consumers.
Subsidies rise as debt mounts
UNDP estimates that universal fossil-fuel subsidies could surpass $1 trillion this year if energy prices remain approximately newest levels. The promising expand comes as a lot of developing economies are already struggling including elevated debt-assist costs and restricted fiscal space.
- “UNDP estimates suggest that using energy prices at current levels, universal fossil fuel subsidies could just surpass $1 trillion this year,” the situation said.
The describe found that 55 developing countries, representing 44% of the sample, now invest greater than 10% of government sales on occupy payments, compared together with 32 countries, or 26%, a decade ago.
Brent crude averaged concerning $101 per barrel in September, representing a 22% rise as the July ceasefire broke down and fighting resumed.
UNDP said slender entry to sponsor, fragile facts systems and difficulties identifying vulnerable households are making it harder for governments to swap extensive subsidies alongside further targeted interventions.
Governments therefore address a swap-off amid suppressing energy prices across subsidies and rate controls or allowing upper costs to arrive at consumers during the time that financing targeted cash transfers for vulnerable households.
Both approaches name for added fiscal resources, creating continued pressure for countries already dealing together with high borrowing costs, debt burdens and competing development needs.
African governments cushion fuel prices
Different African governments have introduced temporary measures to reduced the effect of increased international fuel prices on consumers. The interventions range from fuel-levy reductions to tutorial government absorption of element of pump-charge increases.
- In Kenya, President William Ruto said in April that the government had committed KSh6.5 billion to stabilise fuel prices, alongside a temporary reduction in value-added tax on petroleum products.
- South Africa maintained relief of R3 per litre on petrol from May 6 to June 2 and increased diesel relief to R3.93 per litre, effectively reducing the comprehensive diesel fuel levy to zero during the period.
- Namibia committed regarding N$1.3 billion through the Statewide Energy Support to absorb component of fuel-offer under-recoveries and supplier premiums for April and May.
- Ghana initially absorbed GH¢2 per litre on diesel and GH¢0.36 per litre on petrol in April, alongside the diesel intervention remaining as multinational fuel prices remained elevated.
Nairametrics had furthermore reported in April that Ghana was moving to lessen some taxes and levies along the fuel furnish chain as authorities sought to reduce the consequence of elevated worldwide energy prices on pump prices.
Nigeria avoids revenue to subsidy
Nigeria has mainly avoided returning to a nationwide petrol subsidy following its removal in 2023, despite the renewed surge in universal oil prices. The policy has reduced manage subsidy exposure for the government but has additionally left consumers further exposed to movements in world petroleum prices and foreign-swap costs.
Executive Chairman of the Nigeria Turnover Offering, Zacch Adedeji, said in April that maintaining the former subsidy regime under upper crude prices could have price the government as much as N52 trillion in 2026, equivalent to on 76% of the N68 trillion federal budget.
The approximate was based on a scenario in which crude oil reached $120 per barrel.
Petrol prices that were approximately N800 per litre in advance of the most recent escalation have subsequently climbed to approximately N1,400 per litre at numerous filling stations.
In advance of the subsidy was removed, Nigeria spent regarding N4.3 trillion on petrol subsidies in 2022, although another N3.36 trillion had been budgeted for the initial half of 2023.
UNDP’s broader assessment is that rising energy costs are increasingly forcing developing economies to balance direct consumer protection against debt sustainability and longer-term development spending, as larger subsidy bills uncertainty diverting scarce people resources from investment and necessary services.
Source: Global fossil-fuel subsidies may top $1 trillion in 2026
