Germany Sees Increase in Fuel Prices by Kate Abnett and Alexander Chituc
Energy ministers from European Union (EU) member countries discussed ways on Monday to mitigate the impact of rising energy prices due to the war between the United States and Israel against Iran, now in its third week.
The EU’s heavy reliance on imported oil and gas makes the European bloc very vulnerable to global energy price fluctuations, and some officials and analysts doubt the EU can find quick solutions.
European officials say the European Commission is currently developing emergency measures that include reviewing state aid to industries, reducing national taxes, and considering a future revision of the European carbon market to lower carbon prices by increasing emission quotas.
SUPPLY IS SECURE, ASSURES COMMISSION “We are in the midst of a price crisis,” said European Energy Commissioner Dan Jorgensen to journalists before the energy ministers’ meeting.
However, he emphasized that the EU’s supply of oil and gas is secure, mostly from the United States, Norway, and other suppliers not directly affected by Middle East production cuts.
Jorgensen said Brussels is preparing “targeted and short-term measures” to avoid a major overhaul of the European electricity market design, although some governments have suggested studying this possibility.
Germany, Romania, and Sweden have ruled out reverting to Russian gas exports in Europe to reduce costs. Hungary last week asked Brussels to lift sanctions on Russian energy.
“A Russian gas supply would mean a return to a situation of total insecurity and support for a warmonger. This is out of the question,” insisted German Energy Minister Katherina Reiche.
European Commission President Ursula von der Leyen, for her part, said Brussels was also considering capping gas prices. This measure, introduced after Russia’s invasion of Ukraine in 2022, has never been implemented.
Some countries are concerned that this may limit Europe’s ability to source fuel in global markets if prices soar during a crisis.
Ursula von der Leyen is set to send EU leaders a shortlist of emergency options this week ahead of a European summit on Thursday.
Danish Foreign Minister Lars Lokke Rasmussen said the EU should help ensure freedom of navigation for maritime traffic in the Strait of Hormuz to secure global oil supply and limit price increases.
Approximately one-fifth of global oil and gas passes through the Strait of Hormuz, closed by Iran in response to American and Israeli attacks. President Donald Trump called on allies Sunday to form a military coalition to secure the strait.
GOVERNMENTS UNDER PRESSURE
Gas benchmark prices in Europe have risen by over 50% since the start of the Iran war last month.
Some governments, including Italy, want radical EU intervention, such as suspending the EU’s common carbon emission trading system, to limit the influence of CO2-emitting gas plants on electricity prices.
“The market and investors need stability, so we cannot suddenly suspend the rules,” said Polish Energy Minister Wojciech Wrochna.
Some governments expect Brussels to focus its proposals on national tax cuts or subsidies, “sending the ball back to member states for major actions,” said a European diplomat.
This, however, risks exacerbating inequalities between rich and poor EU member states.
Out of the over €500 billion spent by European governments on support measures during the 2022 energy crisis, €158 billion came from Germany, the largest European economy, according to the Bruegel think tank.
Joanna Pandera, director of the Polish think tank Forum Energii, said different energy mixes and tax policies result in price variations within the 27 EU countries.
“There are structural reasons explaining why energy prices are high in Europe,” she stated.
Executive Secretary of the United Nations Framework Convention on Climate Change (UNFCCC), Simon Stiell, present at the European Energy Ministers’ meeting, told Reuters that disruptions in energy markets caused by the Iran war are a reminder of the risks associated with fossil fuel dependence.
“If there is ever a time to accelerate this energy transition and break free from dependencies that hinder economies, it is now.”
(Authors: Kate Abnett and Alexander Chituc; with contributions from Charlotte Van Campenhout, Sudip Kar-Gupta, Susanna Twidale, and Miranda Murray; French version edited by Etienne Breban and Benoit Van Overstraeten)
