Governments that cut fuel taxes after the Iran war should quickly phase out broad energy subsidies due to their high fiscal cost, Organisation for Economic Co-operation and Development chief economist Stefano Scarpetta said. More than 25 countries, from EU members to Brazil and India, have reduced fuel duties to cushion the shock. Scarpetta warned such measures are costly and can fuel inflation, strain public finances and weaken incentives to reduce fossil fuel use, citing lessons from the 2022

Governments that cut fuel taxes after the Iran war should quickly phase out broad energy subsidies due to their high fiscal cost, Organisation for Economic Co-operation and Development chief economist Stefano Scarpetta said. More than 25 countries, from EU members to Brazil and India, have reduced fuel duties to cushion the shock. Scarpetta warned such measures are costly and can fuel inflation, strain public finances and weaken incentives to reduce fossil fuel use, citing lessons from the 2022 European energy crisis. The OECD expects the Middle East conflict to lift inflation and weigh on growth, though a cease-fire reopening the Strait of Hormuz may limit downside risks. It maintains its outlook for G20 inflation to average about 4% in 2026.