Governments that cut fuel taxes after the Iran war should quickly phase out
broad energy subsidies due to their high fiscal cost, Organization 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.
