Global Fuel Subsidies Rise as Nigerians Pay More Amid Energy Crisis

As global energy markets grapple with disruptions stemming from the US-Iran conflict and the closure of the Strait of Hormuz, numerous countries are implementing fuel subsidies and other relief measures. However, Nigerians continue to experience escalating prices for petrol and diesel, prompting calls from energy economists and industry stakeholders for targeted interventions.

The International Energy Agency (IEA) noted that over 115 countries have responded to the energy shock with various measures. Of these, 94 governments have introduced price-support mechanisms like fuel subsidies, price caps, and tax adjustments. Additionally, 58 countries have adopted energy conservation strategies, and 30 have announced long-term structural policies to reduce fuel consumption.

These global responses come as the disruption of energy flows through the Strait of Hormuz, a critical oil and gas shipping route, has sent ripples through international energy markets. In Nigeria, the impact has manifested as higher petrol prices, which briefly surged above N1,300 per liter in some areas before settling around N1,200. The increased energy costs have also driven up transportation, food, and general business operating expenses.

Jérôme Bilodeau, IEA's head of analysis for its Office of Energy Efficiency and Inclusive Transitions, stated during a webinar that demand-side measures, while helpful, cannot fully compensate for the volume of energy typically transported through the Strait of Hormuz. He highlighted that 58 governments have implemented energy conservation measures, primarily targeting oil consumption through reduced private transport, remote work, and adjusted cooling settings. Meanwhile, Bilodeau noted that countries like Japan and South Korea have introduced price caps and fuel subsidies, while Vietnam has lowered electric vehicle taxes and India promotes electric stoves. Nigerian energy economists, such as Prof. Adeola Adenikinju, are urging the Federal Government to utilize revenue gains for consumer relief.

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Demand-side measures are not enough to replace the sheer size of energy that’s transiting through that strait, but it can dampen and moderate the impact.