UN says fuel subsidies may top US$1 trillion as Iran war drags on

The United Nations warns that fuel subsidies could reach over US$1 trillion in 2022 due to the ongoing Iran war and other global crises, according to a new UN Development Programme (UNDP) study. The report indicates that governments are reaching their limits in protecting consumers from soaring energy prices, with borrowing costs and the impending El Niño phenomenon worsening the situation.

As the UNDP analysis reveals, the number of countries employing relief measures such as price caps, subsidies, and tax rebates nearly doubled between April and September as the war's impact persisted. Without these measures, an estimated 130 million people could have descended below the US$6.85-a-day poverty threshold this year.

The combined effects of the Iran war, rising borrowing costs, and the El Niño weather phenomenon are expected to peak in early 2027, especially considering the potential severity of this year's El Niño, which can cause floods, droughts, and exacerbate food insecurity.

In September, higher energy prices sparked protests and social unrest in at least 10 countries, including Syria, Guatemala, the Philippines, France, and Portugal. Of the 26 UNDP offices surveyed worldwide, 25 anticipate the Middle East crisis will remain a priority or worsen in the next six months, with all locations predicting that "the worst is yet to come."