Iran war: Slovenia rations fuel while Spain cuts petrol tax

The effects of the war in Iran are now beginning to be felt in earnest at European petrol stations. Unfortunately, this is only the start.

Iran has closed the Strait of Hormuz for several days. The consequences of that decision are immense: 20% of the world’s oil passes through this narrow route. It was therefore expected that the repercussions would be global, and Europe is now being affected.

Iran war puts European fuel supplies under pressure

Slovenia is particularly exposed, with the government introducing emergency measures on Sunday 22 March. Fuel purchases are now formally capped at 50 litres per day for private individuals and 200 litres for businesses and priority users, including farmers.

Prime Minister Robert Golob announced the measure as an emergency step, while seeking to reassure the public: “Warehouses are full; there will be no shortage.” The issue stems from a breakdown in logistics, worsened by two factors: extensive fuel stockpiling by private individuals and foreign motorists crossing the border to fill up while prices remain competitive.

These strains demonstrate a mechanism economists know well: panic buying. Even when reserves are adequate, fear of a shortage alone can be enough to cause one. Since the Strait of Hormuz was closed, a barrel of Brent crude has risen from $73 to $112 in under a month, an increase of more than 50% that is automatically feeding through to forecourt prices.

Slovenia limits fuel purchases after the Strait of Hormuz closure

Spain cuts petrol taxes, while Sweden considers doing the same

Spain has chosen a completely different response. Rather than imposing rationing, Madrid has opted to cushion the impact through major tax intervention. From the same Sunday, 22 March, VAT on fuel was halved, falling from 21% to 10%. This is the flagship measure in an 80-point emergency plan unveiled on Friday by Prime Minister Pedro Sánchez, intended to contain the conflict in Iran’s immediate economic effects.

As a result, some drivers have saved up to €8 on a full tank, while the Ministry of Transport estimates the average reduction at 20 cents per litre. Queues formed quickly as stations opened, according to The Independent.

The measures also include a reduction in the special tax on hydrocarbons: 11 cents less per litre of petrol and 5 cents per litre of diesel. Taxation has also been reduced on other energy sources, including natural gas and pellets.

Sweden is likewise considering lower petrol taxes from May. If Parliament gives approval, the country would cut the price of a litre of petrol by 9 cents and that of a litre of diesel by 4 cents. “All parties must recognise that what is happening in the Middle East and the rest of the world is placing the Swedish economy under severe strain,” Prime Minister Ulf Kristersson said at a press conference.

Nevertheless, these measures cannot be viewed as a long-term solution. Final prices remain closely tied to movements in crude oil prices. Moreover, the entire petrochemical industry has been affected by the closure of the Strait of Hormuz. A great many consumer goods could become more expensive in the coming months, especially as the situation in Iran could rapidly deteriorate further.