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Oil price spikes caused by the US and Israel’s war in Iran are straining the pocketbooks of ordinary citizens the world over. But a new study shows that even in normal times, dependence on fossil fuels poses a tremendous financial cost while a small group of companies reaps the rewards.
The report published by the environmental group 350.org on Tuesday found that people around the world are subsidizing the fossil fuel industry to the tune of $12 trillion per year, a cost of about $1,400 for every person on Earth.
The number goes beyond direct government subsidies, with the report explaining that “ordinary people are paying for fossil fuels three times over.”
In addition to the $636 billion in government handouts the International Monetary Fund (IMF) found were paid to fossil fuel companies in 2024, the public also has to bear the burden when conflict or other emergencies cause prices to spike.
The report estimates that during the first 50 days of the Iran war, consumers and businesses have paid an additional $158.6–$166.9 billion due to higher fuel costs. This comes not only at the gas pump, but through heightened costs for food, transport fees, and other basic necessities.
“This crisis is a stark reminder of just how risky it is to rely on fossil fuels, with around 80% of global energy still coming from them and driving the instability we see today,” said Jan Rosenow, professor of energy and climate policy at Oxford University. “Price volatility is not a flaw in the fossil fuel system; it is a built-in feature.”
An investigation published earlier this month by The Guardian found that while consumers are getting hit, the war has been a bonanza for Big Oil. The top 100 companies have raked in an extra $30 million per hour since it began and made $23 billion in windfall profits during the war’s first month.
But the true mammoth cost to consumers comes from mitigating the climate damage caused by unrestrained fossil fuel use, from droughts to floods to heatwaves that have grown increasingly frequent and severe as global temperatures have climbed.
Using peer-reviewed data relied on by the US Environmental Protection Agency (EPA), 350.org estimated that the global population is footing the bill for about $9.3 trillion in climate-related damages and air-pollution-related deaths each year, social costs that the industry causes but pays almost nothing to solve.
The effects hit the poor hardest: Low-income households spend almost twice as large a share of their budgets on energy as higher-income households.
Meanwhile, renewable energy infrastructure, which has high upfront costs but pays for itself over time, is less abundant in developing parts of the world, and countries like Pakistan, Bangladesh, and South Sudan have had to ration power during energy crises.
The poorer Global South is also on the frontlines of some of the worst and most immediate effects of the climate crisis.
In addition to one of the deadliest ongoing conflicts in the world, South Sudan has suffered both severe floods and droughts that have ravaged crop outputs, raising the risk of famine, and schools have had to close for weeks as extreme heat caused children to faint from heat stroke.
Eastern Africa has dealt with the displacement of more than 20 million people from record-breaking floods and droughts.
In Sri Lanka, chronic flooding and pest outbreaks exacerbated by rising temperatures are expected to cost the country 3.5% of its gross domestic product by 2050.
Bill McKibben, the co-founder of 350.org, said that in the coming years, climate upheaval can only be expected to get worse.
“A building El Niño means 2026 and 2027 will set new global temperature records, and that will offer yet more chaos, and yet more reminders that it is the poorest people on Earth who must bear most of the cost of this ongoing tragedy,” he said.
The research conducted by 350.org was built on a model used by the IMF, which found that fossil fuels were costing taxpayers about $7.4 trillion. However, that research rested on a carbon price of $85 per tonne of CO2 emitted into the atmosphere.
350.org found that this figure, which “represents the cheapest possible price to keep warming below 2°C,” vastly understates the damage caused by warming, which peer-reviewed research suggests is between $185-233 per tonne.
While proponents of continued fossil fuel use often oppose green energy expansion on the grounds of cost, the report notes that just that $4.1 trillion undercount would be enough to finance more than 5,900 gigawatts of new solar capacity—enough to power every home in Africa, South Asia, and Latin America combined.
“The economic case for fossil fuels has not just weakened, it has collapsed,” said Anne Jellema, 350.org’s chief executive.
In addition to calling for an immediate end to both the war in Iran and Israel’s war against Lebanon, 350.org called on governments around the world to tax the industry’s wartime windfall profits and put the money toward lowering the energy bills of ordinary families.
The group also called to replace fossil fuel subsidies with household support and subsidies for cheaper renewables, which it says will be resistant to the shocks that oil and gas regularly face.
“Renewables are not controlled by a few fossil fuel-exporting countries,” said Hala Kilani, the head of energy diplomacy for the international climate policy network REN21. “It is abundant, distributed, and affordable. It can stabilize costs and be deployed locally, empowering communities rather than concentrating power. It is a peace, development, and justice solution. It’s high time we transition to reliable, affordable renewable energy.”
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