Newsroom
The government has stopped one petrol-price increase from reaching Cyprus drivers, but the international oil market may be preparing another.
Cabinet on Thursday formally extended the reduction in fuel tax until Nov. 30, preserving a saving of 8.33 cents on every litre of petrol or diesel. The measure had been due to expire on Sept. 17, which would have produced an overnight increase at the pump.
For a typical 50-litre fill-up, the tax cut is worth just over €4. For someone filling the tank four times a month, that adds up to nearly €17.
It is welcome relief, particularly as households face the usual September pile-up of school expenses, electricity bills and post-holiday reality.
But while the government can control the tax it charges, it cannot control what happens to the price of oil thousands of kilometres away.
Brent crude, the international benchmark used to price much of Europe’s fuel, briefly reached $109.97 a barrel on Friday, its highest level in four months, after jumping more than 6% the previous day. It later eased to around $106 but remained about 10% higher for the week.
The surge comes as oil shipments through the Strait of Hormuz remain restricted amid fighting between the United States and Iran. New threats to shipping in the Red Sea have added another layer of uncertainty.
This matters because a large share of the world’s oil passes through these narrow sea routes. When tankers cannot move normally, or when companies must pay more for insurance and security, the additional cost eventually travels down the supply chain.
And Cyprus, which imports its fuel, is not standing at the end of that chain wearing a magic shield.
A higher international oil price does not automatically appear on petrol-station signs the following morning. Local prices depend on existing stocks, supply contracts, transport costs, and the euro-dollar exchange rate.
But if oil remains above $100 for a prolonged period, the pressure will eventually reach the pump.
That means the 8.33-cent tax reduction may continue to exist on paper while drivers see part, or potentially all, of its benefit eaten away by higher wholesale prices.
The tax measure, approved by Cabinet on Thursday, will remain in effect until Nov. 30. Finance Minister Makis Keravnos said the extension reflects the government’s intention to continue supporting households and businesses in the face of high prices.
The real question now is not whether motorists will keep the tax saving. That has been secured. It is whether the final price displayed at petrol stations will stay low enough for drivers to notice it.
The effects also travel much further than the family car.
More expensive diesel raises the cost of moving food, parcels, and building materials around the island. Businesses facing higher delivery and operating expenses may pass those costs on to customers.
Airlines also pay more for fuel, potentially placing upward pressure on ticket prices. Farmers and contractors running heavy machinery face higher expenses, while electricity costs can also rise because Cyprus continues to rely heavily on imported fuel for power generation.
In short, a conflict near the Strait of Hormuz can eventually show up in a supermarket receipt in Nicosia, an electricity bill in Limassol, or the cost of a flight from Larnaca.
The same energy shock is already feeding inflation. Cyprus’ harmonized inflation rate reached an estimated 5.2% in August, while the European Central Bank raised interest rates by 0.25 percentage points on Thursday to prevent higher energy costs from spreading more deeply through the economy.
That creates the risk of a double squeeze for households: more expensive fuel and goods on one side and potentially higher variable-rate loan repayments on the other.
