Drivers in Spain could face a fuel price hike as support scheme runs out in weeks

One fuel gets a little cheaper at Spanish pumps this week, the other a little more expensive, and by October neither discount is due to exist at all. Tuesday’s change is confirmed, but what replaces it once the scheme runs out is still an open question.

What changes at Spanish pumps from Tuesday

From Tuesday September 1, the discount applied to diesel through Spain’s hydrocarbons tax rises to 20 cents a litre, up from 10 cents in August. However, the discount on petrol moves the opposite way, dropping from 10 cents to five cents a litre.

Pump prices were already close to €1.86 a litre for diesel and €1.72 for petrol last week. For a typical 55-litre tank, the new discount works out at roughly €5.50 more off a fill of diesel than in August, but around €2.75 less off a fill of petrol, before whatever the underlying price does on the day. 

Why diesel and petrol are moving in opposite directions

The difference comes down to a safeguard clause in the scheme: diesel’s price hike passed the 15 per cent threshold that allows its own discount to expand, while petrol’s price didn’t rise above its threshold, therefore petrol’s support simply kept shrinking on the original schedule. 

A royal decree approved at the end of June reset how the government supports drivers at the pump, replacing the reduced 10 per cent VAT rate that had run since March with this shrinking discount on the hydrocarbons tax instead.

The whole scheme runs out at the end of September – what then?

The support plan, introduced in response to the conflict involving Iran, is only due to run until the end of September. The discount is scheduled to disappear entirely from October, and nothing has been confirmed to replace it. The Spanish government has said only that it is keeping a close, minute-by-minute watch on how the conflict continues to affect the economy, not that they intend to extend the discount or have any alternative solutions.

Fuel keeps getting more expensive regardless 

Spain’s flash inflation figure for August, which showed prices jumping to 4.3 per cent, confirmed fuel got more expensive again last month even with the discount still in place. The confirmed figure follows on September 15, the same day the government’s taper reaches its final scheduled month.

Drivers filling up this week will see Tuesday’s new numbers reflected straight away. But the bigger question, for now unanswered, is what happens at the pump once the scheme that has softened prices since the spring disappears completely this autumn.