The week started with significant increases in fuel prices in Portugal. Gasoline recorded the biggest weekly increase since 2022, rising nine cents per liter after the application of the excise tax (ISP) discount of three cents. Initially, the ACP projected an increase of 12 cents in gasoline and 15 cents in diesel, but the government discount reduced these increases to nine and 12 cents, respectively. The average price settled at 2.112 euros per liter for gasoline and 2.139 euros for diesel.
Fuel prices continue to be impacted by the war in the Middle East, with the United States, Israel, and Iran involved in military attacks in the region. The conflict led to the blockade of the Strait of Hormuz, through which 20% of global oil and natural gas trade passes, causing severe price changes. The last time a similar weekly increase in gasoline occurred was in March and June 2022, due to the conflict between Russia and Ukraine, with increases of about 10 cents per liter.
Since the beginning of the war in the Middle East, the Government has committed to applying an extraordinary and temporary reduction in the ISP whenever fuel increases exceed 10 cents, to mitigate the price escalation. This reduction has a cumulative effect each week. According to an estimate by the Public Finance Council, the extraordinary ISP discount will cost the State's tax revenue 777 million euros.
In addition to the ISP, the executive of Luís Montenegro advanced additional measures, including the release of up to 10% of the country's strategic fuel reserves, in a joint action with the countries of the International Energy Agency. More recently, the Government created a Temporary Solidarity Contribution on the Oil Sector, which will tax at 33% the extraordinary profits of companies in the crude oil and refining sectors.
