The UN Development Programme (UNDP) released a report titled "Military Escalation in the Middle East: Cushioning the Global Shock." The report projects that global fossil fuel subsidies could reach $1.1 trillion in 2026 if oil prices average $88.60 per barrel.

This projected total for 2026 represents an increase of approximately $410 billion compared to the 2025 total. The report further indicates that if oil prices rise to $110 per barrel, global fossil fuel subsidies could climb to $1.43 trillion in 2026.

Governments in developing economies have utilized fossil fuel subsidies, price caps, and tax rebates to mitigate the impact of higher oil prices on families. UNDP Administrator Alexander De Croo stated, "Money that should be building schools, hospitals, and clean energy systems is being used simply to keep economies afloat."

The report notes that nearly half of the world's poorest countries are currently in debt distress or face a high risk of it. The median developing economy is anticipated to allocate 9.5 percent of its government revenue to debt servicing this year.

This debt service share for the median developing economy is double what it was a decade ago and represents the highest level in 25 years. De Croo added, "No country should have to sacrifice its future development to manage a crisis it did not create."

Why It Matters

The projected increase in global fossil fuel subsidies, particularly for developing economies, indicates a diversion of financial resources that could otherwise be directed toward essential services and sustainable development. This comes as many developing economies are already experiencing debt burdens, with debt servicing consuming a portion of government revenue.

The reliance on subsidies to stabilize energy costs in these countries suggests an impact on their ability to invest in long-term development initiatives, alongside the financial strain caused by volatile global oil prices. The UNDP assessment links energy policy and national economic stability, especially for vulnerable nations.