EU seeks coordinated action amid fears of prolonged energy supply disruption

The European Union needs to take coordinated action to tackle the energy market volatility caused by the war in the Middle East, avoiding fragmented responses by individual member states, their energy ministers agreed, without putting forward any specific proposals. Although the EU’s energy supplies are not under immediate threat, the bloc must prepare for a prolonged crisis and take steps to reduce oil demand, European Commissioner for Energy and Housing Dan Jørgensen warned, adding that the European Commission will soon unveil a set of measures.

Since the beginning of the conflict, prices in the EU have risen by around 70% for natural gas and by 60% for oil, increasing the cost of the EU’s fossil fuel imports by EUR 14 billion in the first 30 days, Jørgensen noted at the EU energy ministers’ video conference.

The European Commission noted that the EU’s security of supply remains protected at this stage thanks to member states’ mandatory oil reserves and contingency plans for supply disruptions.

Oil prices in the EU rose 60% since the beginning of the conflict, while natural gas soared 70%

However, Jørgensen warned that the bloc must prepare for a potentially prolonged disruption of international energy trade, adding that the European Commission is working on a set of measures that will be unveiled soon.

“While there are no immediate oil and gas supply shortages in the European Union, we see tightening in certain product markets, notably diesel and jet fuel, as well as increasing constraints in the global gas market and its spill-over effects into electricity prices,” he said.

Speaking to reporters in Brussels, he urged member countries to take steps to save fuel, including by following recent recommendations of the International Energy Agency (IEA).

On the European Commission’s planned measures, he said they would include making it easier to use power purchase agreements (PPAs) and contracts for difference (CfDs) to help decouple electricity prices from gas.

The European Commission’s measures will facilitate PPAs and CfDs

He also said that the commission would propose simpler rules for governments to support vulnerable groups or industries, and he stressed that now was the right time to lower taxes on electricity, according to reports.

In the longer term, EU countries should step up efforts to deploy more renewables to help reduce dependence on fossil fuels, according to him.

For its part, the European Commission called on member states to refrain from taking steps that may increase fuel consumption, constrain the free flow of petroleum products, or disincentivize refineries’ output.

Member states are also advised to postpone any non-emergency refinery maintenance and increase the use of biofuels as a substitute for fossil fuel products, which could ease pressure on the market.