Diesel prices surge 15% as inflation hits 3.6%, forcing Spain to raise fuel subsidy

Spain’s national statistics institute confirmed Thursday that annual inflation rose to 3.6% in July, up four-tenths from June, driven by higher fuel and electricity costs. Electricity prices alone rose 8.4% year-on-year. The price of diesel jumped 15.7% in July compared to the same month last year. That figure crosses the 15% threshold set in a government decree designed to cushion the impact of the war in Iran. As a result, a safeguard clause automatically kicks in, raising the diesel tax rebate to 20 cents per liter in September, up from the 5 cents originally planned for that month. Gasoline, which rose 7.3% year-on-year in July, stays below the 15% trigger. It will follow the original schedule, with a 5-cent rebate per liter in September. Officials say the mechanism works proportionally, offering extra protection only where price pressure is highest. The economy ministry says the latest decree is designed to adapt to the conflict’s evolution and can be expanded again if conditions worsen. It stressed that the first response plan, launched in March, and its extension, approved by parliament on July 23, are meeting their main goal: softening the external shock’s impact on inflation and household purchasing power. Food prices rose just 1.6% year-on-year in July, three-tenths lower than in June and the smallest increase since 2021. Core inflation, which excludes energy and fresh food, stood at 3%, one-tenth higher than the previous month. This marks the fifth straight month inflation has remained above 3%, reaching its highest level in over two years amid the energy shock from the Iran conflict.