European Commissioner for Energy and Housing Dan Jørgensen warned of another energy crisis and a difficult winter ahead for citizens and the economy of the European Union, pointing to persistently high prices of gas and oil products. He told member states that fossil fuel subsidies must be targeted and temporary. “Do whatever you can to transition away from fossil fuels as fast as possible, meaning more renewables, meaning more energy efficiency, electrification away from gas boilers, oil boilers, into electric heat pumps, electric vehicles instead of combustion engine cars,” Jørgensen added.
The European Union has started a dialogue with operators of refineries to address the lack of domestic capacities amid very elevated prices of oil derivatives in the past months. Natural gas is the most expensive in four years, which is also spilling over to the electricity sector.
“There’s no doubt that ministers from all member states know that we are facing a difficult winter, that the crisis that we’re in right now, due to the situation in the Middle East, means that we are looking at very high prices of both gas and oil products. We do not expect a security of supply issue as such. But for the citizens that are struggling to pay their bills, that might not matter,” European Commissioner for Energy and Housing Dan Jørgensen said.
Subsidizing fossil fuels directly can be necessary sometimes
Speaking after the meeting of energy ministers, the so-called Energy Council within the Council of the EU, he acknowledged that subsidizing fossil fuels directly can be necessary sometimes. However, Jørgensen stressed, such measures need to be targeted and temporary.
He called on member states “to transition away from fossil fuels as fast as possible” in favor of electrification – primarily heat pumps instead of oil or gas boilers and electric vehicles instead of combustion engine cars, together with energy efficiency.
“We are in the process of stabilising the diesel markets as best we can, as winter begins,” Jørgensen asserted.
Fuel bills in the EU are skyrocketing
Member states have reaffirmed their commitment to an accelerated release of 42.6 million barrels from strategic reserves over the next months. Half of the quantity would be diesel fuel.
“Once again, due to geopolitical turbulence, Europe faces another energy crisis. As in 2022, after Russia’s illegal invasion of Ukraine, prices of crude oil and petroleum products have increased significantly worldwide. And fuel bills in the EU are skyrocketing,” Jørgensen said earlier this week as the talks with refineries started.
Diesel amounts to half of the strategic reserve release
Recalling the International Energy Agency’s projection, the commissioner said the global diesel market is expected to remain tight well into 2027, keeping prices high.
Over the last two decades, a quarter of EU refineries were shut down, translating to a 10% drop in overall capacity, he explained.
EU conducting short-term interventions, but also structural adjustments to ease price spikes
Notably, expectations of high prices for longer periods are an incentive for investments. But for the EU it is an urgent as well as strategic issue, relevant for security and defense.
“We need to create an environment that supports domestic fuel production in Europe as well as long-term viability of European refining as the EU decarbonizes. Looking further into the future, refineries and new entrants need to embark on a pathway of producing more bio- and e-fuels,” Jørgensen added.
Natural gas jumps above EUR 100 per MWh
The price of Brent oil futures is at its highest levels since May, when the supply crisis due to the Iran war peaked. The benchmark contract went today for as much as USD 114 per barrel.
The Dutch TTF Natural Gas futures have surged past EUR 100 per MWh for the first time since November 2022, when the energy crisis was subsiding. Today it touched EUR 102.79 per MWh, which is more than ten times above the comparable contract in the United States.
As gas drives electricity prices, they have been rallying to extremely high levels over the past weeks, led by Southeastern Europe and Hungary. Gas has rallied much faster than crude since the summer.
Like several times in the past few weeks, Serbia had the highest price today in the day-ahead electricity markets – EUR 291 per MWh for October 31. Next in the chart were Austria, Hungary and Switzerland, at EUR 253 per MWh.
The highest price this month was also in Serbia, EUR 329 per MWh on October 10. The country has been relying more and more on imports in the past few years.
