Greece Rolls Out Fuel Support as Energy Pressures Build

Prime Minister Kyriakos Mitsotakis has said announcements are forthcoming and has indicated that heating oil is expected to enter the market at less than €1.75 a liter.

Greece is preparing a first line of defense against renewed energy-price pressures, putting expanded heating-oil support at the center of its response while keeping additional measures for gasoline and diesel in reserve if the crisis deepens.

The government’s strategy reflects the uncertainty created by tensions in the Middle East and the difficulty of forecasting global oil prices even a few months ahead. Officials are preparing to reassess support for transportation fuels as frequently as month by month, depending on how prices develop and how much of the increase reaches households and businesses.

The immediate priority is the heating allowance, a subsidy designed to help households cover winter energy costs. The government is expected to increase the benefit across the board and broaden eligibility so that more households qualify. It is also looking for ways to keep heating-oil prices down when the winter sales season begins.

Prime Minister Kyriakos Mitsotakis has said announcements are forthcoming and has indicated that heating oil is expected to enter the market at less than €1.75 a liter. The government is also bringing back a cap on profit margins and extending a subsidy for automotive diesel through October.

For now, Athens is steering away from cuts to fuel taxes. Instead, officials favor targeted assistance that can be expanded or withdrawn as market conditions change. Options include versions of the Fuel Pass, a consumer subsidy used during the previous energy crisis, as well as direct subsidies at the pump if gasoline and diesel prices rise far enough to warrant further intervention.

Timing is becoming almost as important as the size of the assistance. Finance officials are considering paying the heating allowance earlier than last year, when the first installment arrived shortly before Christmas. Heating-oil orders begin Oct. 15, and the government wants households to have additional cash before winter purchases accelerate.

Behind those initial measures lies a second layer of contingency planning. The government has initially earmarked €200 million to respond to the energy shock, but officials aren’t assuming that will be enough. Last year’s heating allowance alone cost €165.2 million and reached 868,466 recipients, even though energy prices were lower.

That arithmetic has prompted the Finance Ministry to prepare for both adverse and severely adverse scenarios. If international oil prices remain exceptionally high, the government could have to commit additional fiscal resources and adjust its response as the crisis unfolds.

Among the options under consideration are broader subsidies for transportation fuels and a return of more extensive Fuel Pass-style assistance. Under an extreme scenario, officials have even discussed measures reminiscent of the pandemic period, including greater use of remote work to reduce commuting and fuel consumption. Such steps are viewed as a last resort and would be considered only if energy prices reached extreme levels.

October is emerging as a crucial test. By then, officials expect to have a clearer picture of international energy prices, the budgetary cost of the measures already introduced and, perhaps most importantly, the extent to which higher energy costs are feeding through to the broader economy.

That transmission is already beginning. Greek companies face higher bills for energy, transportation and raw materials. Small and midsize businesses are particularly exposed because they have less capacity to absorb another increase in operating expenses. Industrial companies, meanwhile, are reviving energy-saving practices used during the previous energy crisis.

The bigger concern is inflation. Producers and suppliers are for now trying to absorb part of the additional cost, mindful that household purchasing power remains under pressure. But the longer energy prices remain elevated, the harder it becomes for companies to prevent those costs from reaching consumers through higher retail prices.

That creates a difficult trade-off. Companies that pass on rising costs risk weakening demand. Those that absorb them face shrinking margins. For the government, meanwhile, increasingly generous subsidies would put additional pressure on the budget.

October matters for another reason: Businesses haven’t committed to maintaining voluntary price-restraint initiatives beyond that point. If increases in fuel, electricity and transportation costs persist, they could spread through supply chains and eventually show up across a wider range of goods and services.