With inflation once again through the roof and without prospects of it falling imminently –the European Central Bank (ECB) has resumed raising interest rates–, the Spanish government has been forced to extend part of the measures put in place due to the war in Iran, which were set to expire this September 30th. It is, therefore, the third package of measures approved by Pedro Sánchez's executive to mitigate the effects of the conflict on the cost of living, and it will cost the public coffers 12 billion euros.

The price of gasoline maintains its upward trend in Spain and has added its twelfth consecutive week of increases, hitting a new annual high, while diesel has resumed the hikes that thus eliminate the effect of a large part of the tax cuts due to the activation of the safeguard mechanism in September.

The First Vice President and Minister of Economy, Carlos Cuerpo, confirmed this Wednesday in Congress that the new decree on aid for the inflationary crisis derived from the conflict in the Middle East will be approved at the Council of Ministers next Tuesday, September 29. Some of the current measures will cease to be in force on October 1 if they are not extended.

The war in the Middle East following the attacks by the United States and Israel on Iran and the subsequent blockade of the Strait of Hormuz have caused an increase in the price of oil, which has already translated into an increase in fuel prices and, in turn, an increase in inflation in much of the world. Furthermore, the situation is aggravated by the attacks by the Houthis of Yemen in the Bab el-Mandeb Strait and the closure of the East-West pipeline of Saudi Arabia, which further hinders the supply of oil from the Persian Gulf to the rest of the world.

The president of the United States Federal Reserve (Fed), Kevin Warsh, faces the challenge this Wednesday of raising interest rates to combat inflation, which stood at 3.4% in August, far from the 2% target. Markets and investors take for granted a quarter-point increase, with a probability of more than 90%, according to the digital tool Fedwatch CME. But there is a problem: this is precisely the opposite of what the country's president, Donald Trump, who pushed for Warsh's appointment, wants. The head of the White House, in addition, threatened to cut off trade with all countries with which it has a trade deficit if the Fed does not lower the price of money, currently situated between 3.50% and 3.75%, after keeping it in July.

The cost of living for families continues to rise due to the increase in energy prices. In August, the prices of the set of consumer goods and services in Catalonia shot up by 4% annually, the highest figure since January 2023, but lower than the Spanish average, according to data from the Consumer Price Index (CPI) published this Tuesday by the National Statistics Institute (INE).

After a summer with rising fuel prices, this Tuesday the subsidy for diesel will increase to 20 cents per liter. From September 1, the reduction in the hydrocarbon tax on diesel will return to its initial level. This is an initiative that is applied automatically, because the Spanish government foresaw its application if prices were to skyrocket by more than 15% compared to a year ago.

Although the price of a barrel of Brent crude oil has managed to fall below 90 euros this week, this decrease is not reflected in fuel prices. On the contrary, gasoline and diesel prices in Spain continue to rise and have already been increasing for eight consecutive weeks, that is, throughout the summer. Thus, on the eve of the holiday return operation – the State Directorate General of Traffic expects 6.9 million journeys this weekend – fuel prices are the highest of the entire summer and are close to annual highs.

The tension in the fuel market caused by the war in the Middle East continues to put pressure on consumers' pockets. As confirmed this Thursday by the Spanish government, diesel has become expensive enough during the month of July to reinstate the hydrocarbon tax reduction to 20 cents per liter.

The debate is on the table as to whether fuel discounts will be extended until the end of September. We are talking about 21 cents per liter of gasoline and 29 cents per liter of diesel. This discount combines a reduction in VAT and another reduction in the hydrocarbon tax. With the current reduction, Spain is already at the lower limit of taxation allowed by the European Union. Why can the Government influence the price of fuel so much?According to the CNMC, approximately half of the price we pay corresponds to the costs and margins of the companies in the chain, while the other half consists of taxes: VAT and the hydrocarbon tax. In fact, gasoline bears a higher tax burden than diesel. The most striking thing is that VAT is calculated on the base price plus the hydrocarbon tax. In other words, we pay a tax on another tax. Therefore, any increase in price is immediately translated into more revenue for the State.As the holidays approach, the decision is more relevant than ever. An increase in fuel prices would drive up inflation in the coming months, which already stands at a worrying 3.2%. Let's not forget that energy is the raw material of all raw materials: when it becomes more expensive, it ends up making almost everything more expensive. Private car fuel consumption always rises during summer months. The price of fuel, moreover, conditions our perception of inflation. Few people consult the CPI every month, but everyone who drives knows how much it costs to fill the tank. When gasoline approached two euros per liter, it made headlines. Deep down, it's also a political climate decision. And, if not, there's always that joke that says no matter how much the price goes up, we can always put in 20 euros of gasoline.

The moderation of energy prices and, therefore, of the inflation rate in April and May – when it stood at 3.2% – implies that the Spanish government's shock plan approved in March due to the war in the Middle East will follow the planned schedule. Despite the context of uncertainty regarding the evolution of the conflict, starting this Monday, June 1st, some of the tax reductions that have been applied to energy until now will disappear, while other measures will remain in place until June 30th. In any case, families and businesses will already notice this in their electricity and gas bills.

The reduction in electricity and natural gas bills moderated the increase in the cost of living in April, both in Catalonia and in Spain as a whole. The measures approved by the Spanish government to reduce some taxes on electricity and gas had the desired effect, although, on the other hand, the cost of fuel continued to rise due to uncertainty in international energy markets because of the war in Iran.

The German airline Lufthansa has reported that the closure of its short-haul airline Lufthansa CityLine will reduce the group's capacity by 1% and means the elimination of 20,000 flights, equivalent to about 40,000 metric tons of aviation fuel, a product whose price has doubled since the outbreak of the war in the Persian Gulf.

The Spanish government has approved new adjustments for road, rail, and maritime transport to mitigate the effects of fuel costs due to the war in the Middle East. These measures are in addition to those already approved, and among them, the aid of up to 20 cents per liter of professional diesel stands out.

The rise in fuel prices caused by the war in the Middle East sent the cost of living soaring in Catalonia and Spain in March, the first month with the war's effects, according to consumer price index (CPI, the indicator that measures the cost of living for families) data published this Tuesday by the National Statistics Institute (INE).

The European Commission has warned Spain that reducing VAT on fuels to 10%, as the government of Pedro Sánchez has done in the decree to alleviate the impact of the war in Iran on households, violates European rules. This was communicated in a letter sent to the Spanish government at the end of March, according to sources from the European executive told El País. "It is important to point out that the EU VAT directive does not provide for the possibility of applying a reduced rate to fuel supplies," the Commission explains, according to the Madrid newspaper. Poland, another country that has opted for the same path as Spain, has also received a similar letter.

The European Union is studying possible measures such as rationing fuel and releasing more oil from strategic reserves in the face of the risk of a "lasting" energy shock resulting from the war in the Middle East, European Energy Commissioner Dan Jørgensen assured this Friday in an interview with the British newspaper Financial Times. The bloc is evaluating "all options," according to Jørgensen, who warned that "energy prices will be higher for a long time."

The European Union is considering possible measures such as rationing fuel and releasing more oil from strategic reserves in the face of the risk of a "lasting" energy shock stemming from the war in the Middle East, European Commissioner for Energy Dan Jørgensen said this Friday in an interview with the British newspaperFinancial Times. The bloc is evaluating "all options", according to Jørgensen, who warned that "energy prices will be higher for a long time".

The announcement of the VAT reduction on fuels from 21% to 10% just over a week ago, decreed by the Spanish government, has not had the expected effects, according to the consumer association Facua. This extraordinary measure, intended to cushion the impact of rising crude oil prices due to the war in Iran and the closure of the Strait of Hormuz, has made it possible to reduce the price of fuel (diesel and gasoline) and move it away from two euros per liter, but it has not had the desired real impact on the pockets of final consumers, according to Rubén Sánchez, spokesperson for Facua.The consumer association estimates that one in every four petrol stations took advantage of the entry into force of the decree that reduces the price of VAT on fuels to apply a hidden price increase, and criticizes the refusal of Pedro Sánchez's executive to set price caps on fuel or limit the final commercial margin of petrol stations on the final price.  

The war in Iran and the resulting increase in energy costs have impacted inflation in Spain. Thus, the cost of living for families this March has notably increased compared to February, as a result of the rise in prices of fuels and electricity.