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The government's fuel discount for diesel is set to rise to 20 cents per litre from this Tuesday September 1, well above the 5 cents originally planned for the month, after diesel prices jumped sharply in July and failed to level out enough in August.

 

The latest CPI figures showed that diesel prices rose by 15.7% year on year last month, pushing past the 15% threshold set out in the government's decree aimed at containing the impact of the war in Iran. Once that threshold is crossed, a safeguard clause built into the anti-crisis plan kicks in automatically, triggering the bigger discount from Tuesday.

 

Petrol, on the other hand, rose by a more modest 7.3% year on year in July, staying below the 15% threshold, so it'll continue on its usual gradual discount schedule, with prices dropping by 5 cents per litre in September. The Ministry of Economy explained that the mechanism acts proportionately, reinforcing protection only where price pressures justify it.

 

According to the Ministry, the latest Royal Decree-Law on anti-crisis measures has been designed with flexibility in mind, allowing for greater protection if the situation in Iran worsens further. The rest of the government's anti-crisis measures remain unchanged.

 

The Ministry maintains that the measures introduced so far are having the intended effect. Both the original Response Plan launched in March and its follow up, approved by the Council of Ministers at the end of June, are said to be helping soften the blow of the conflict on inflation and household spending power.

 

Officials estimate the plan has reduced inflation by around one percentage point in recent months, which they say accounts for more than 60% of the price rises caused by the war in Iran. The government says it will continue monitoring the situation closely alongside social partners and the sectors most affected.

 

Despite this optimism, preliminary data released by the National Statistics Institute (INE) last Friday showed annual inflation climbing from 3.6% in July to 4.3% in August, its highest level since February 2023 and the first time it's passed 4% since April 2023. The INE put the rise down mainly to higher fuel and lubricant costs, along with food prices that didn't fall as much this August as they did last year. The Ministry of Economy echoed this, pointing to the ongoing energy shock caused by the war in Iran as the main driver.

 

The 4.3% figure is still provisional, with a final reading due on September 15 that will give a clearer picture of which everyday items pushed prices up the most.

 

Fuel prices have now risen for eight weeks in a row, adding up to an increase of almost 24% since the temporary VAT cut on fuel expired at the start of July, with prices reaching their highest levels of the summer just as the August getaway wound down.

 

Diesel rose by 1.8% in the last week alone to reach €1.861 a litre, its highest level since mid-April, while petrol climbed 1.55% to €1.723 a litre, its highest price since March. Overall, diesel prices have now risen by more than 23.7% and petrol by 19.8%.