UN Development Programme Says Fuel Subsidies Could Top 1 Trillion Dollars in 2026
Fuel subsidies could cost governments more than 1 trillion dollars this year, according to a United Nations Development Programme report released on 2 October and reported by Bloomberg, as the number of countries using relief measures nearly doubled between April and September. Without those measures, an additional 130 million people could have fallen below the 6.85 dollars a day poverty line this year, the report found.
Three shocks at once
George Gray Molina, the agency’s chief economist, pointed to three shocks: the war in the Middle East, higher borrowing costs and El Niño, which the report says is on track to be the strongest on record. “We don’t see a very clear pathway out of the three-pronged crisis,” he said. He said September marked a shift, as some governments began letting higher energy prices flow through to citizens and started rolling back subsidies and tax relief, Reuters reported.
Administrator Alexander De Croo said the agency’s surveys show the conflict has become “a crisis which has an impact on approximately 100 countries.” Higher energy prices contributed to protests and social unrest in 10 countries in September, and all 26 offices surveyed judged that the worst was still to come. The analysis draws on data from the World Bank, the International Monetary Fund and the International Energy Agency.
Measured against the June baseline
UNDP’s 29 June report, Military Escalation in the Middle East: Cushioning the Global Shock, put fossil fuel subsidies on track for 1.1 trillion dollars in 2026, 410 billion dollars more than in 2025, assuming an average oil price of 88.6 dollars a barrel. On our calculation, that implies a 2025 bill of about 690 billion dollars and an increase of more than half this year. Its severe scenario, with oil averaging 110 dollars, put the bill at 1.43 trillion dollars.
Fossil fuel subsidy estimates, 2025 and 2026
| Estimate | Subsidy bill | Oil price assumption |
|---|---|---|
| June severe scenario | $1.43 trillion | $110 average |
| June baseline | $1.1 trillion | $88.6 average |
| 2 October report, fuel subsidies | more than $1 trillion | not stated |
| 2025, implied | about $690 billion |
June figures from the 29 June report; the 2025 bill is our calculation from its baseline and the 410 billion dollar increase.
The December Brent contract settled at 102.31 dollars a barrel on 1 October, Reuters reported, which on our calculation is 15 percent above the June baseline assumption and 7 percent below the severe scenario’s average. The comparison is indicative only, since the June assumptions are full-year averages and the futures price is a single settlement.
The June report also measured the debt side of the squeeze: the median developing economy is estimated to spend 9.53 percent of government revenue on interest this year, and 55 developing economies pay more than 10 percent of revenue in interest on average over 2024 to 2026, against 32 a decade earlier.
Why it matters: For the median developing economy, interest is estimated to take 9.53 percent of government revenue, the highest share in 25 years, so a subsidy bill above 1 trillion dollars leaves less room to extend relief while oil trades near 100 dollars.
Outlook: The report projects the combined shocks to peak in early 2027. Gray Molina said bond market and oil price developments over the next 60 days will be crucial, and De Croo expects the pressures on developing countries to be discussed at the IMF and World Bank annual meetings in Bangkok from 12 to 18 October.
Sources: United Nations Development Programme, Bloomberg, Reuters, The Edge.
