Fuel Price Update for Tomorrow Readers: What You Need to Know
If you’ve been driving recently, you’ve likely felt the squeeze at the pumps. Fuel prices in Portugal are facing significant upward pressure due to the escalating conflict in the Middle East.
With disruptions to key global shipping routes, such as the Strait of Hormuz, international crude oil prices have surged, directly inflating the cost of both diesel and gasoline in Portugal. In a recent weekly adjustment, prices were slated to jump by 10 cents per litre for gasoline and 10.3 cents per litre for diesel.
Here is a breakdown of how the Portuguese government is responding to the crisis, along with some practical advice for your next trip to the pump.
How the Government is Reacting
The government has acknowledged the severity of the price hikes, with the Minister of the Economy, Manuel Castro Almeida, assuring the public that the state will not use the war to gain “tax advantages”.
To help mitigate the impact on drivers, the government is utilising a tax adjustment mechanism. Because higher fuel prices automatically generate more VAT (IVA) revenue for the state, the government has decided to return this excess tax collection to consumers by applying a corresponding discount to the ISP (Tax on Petroleum Products).
However, there is a catch that has drawn some criticism: the discount mechanism is currently triggered only for price increases exceeding 10 cents. Because of this rule, there have been recent instances where the tax gain was returned to consumers for diesel, but not for gasoline, simply because the gasoline price hike fell just short of the 10-cent threshold. Critics have argued that the government is “running after the loss” and should instead apply automatic tax relief for any increase, as well as consider suspending the carbon tax to provide immediate relief.
For now, the government is monitoring the situation daily. Minister Castro Almeida stated that if these elevated prices persist for more than four to five weeks, the government will treat the situation as a structural problem requiring further state intervention.
Advice on Filling Up
- Beat the Monday Hikes: In Portugal, fuel prices at the pumps are generally adjusted at the beginning of the week (Mondays), reflecting the average international crude prices from the previous week.
- Stay Informed: To anticipate these changes, consumers are advised to closely monitor updates released by energy and regulatory entities late in the week. If the news indicates that international crude prices have been rising, your best move is to fill up your tank over the weekend before the new, higher prices take effect on Monday morning.
