The European Commission has declared the energy crisis will become even worse and prolonged. European Energy Commissioner Dan Jørgensen stated that even if peace is achieved tomorrow, the situation will not return to normal in the foreseeable future. This crisis is more acute than the 2022 energy crisis due to an additional shortage of roughly 20% of global oil from Gulf States unable to cross the Strait of Hormuz, according to Jørgensen.
Geopolitical tensions have directly disrupted global energy supplies. Supply disruptions were caused by delays in Qatari LNG shipments due to US and Israeli military attacks against Iran. According to multiple reports, Iran has closed the Strait of Hormuz, through which about one-fifth of global oil traded passes, in retaliation to US-Israeli strikes. Prices rose and volatility increased amid ongoing escalations following US President Donald Trump's ultimatum to Iran to open the Strait of Hormuz within 48 hours or face consequences.
Immediate market impacts have been severe. Oil and gas prices have risen by 70% and 50% respectively in the EU. Since the first strikes on Iran at the end of February, oil and gas prices have soared as much as 70 percent, according to reports. Since the start of the war, the EU's bill for imported fossil fuels has risen by €14 billion.
Supply chain vulnerabilities are emerging, particularly involving Qatar. QatarEnergy is no longer able to fulfill its contractual production obligations in full, according to CEO Saad Sherida al-Kaabi. Belgium, Italy, and Poland are among the EU countries more at risk of supply disruptions from Qatar, al-Kaabi noted. However, the EU's security of supply remains relatively protected due to limited reliance on imports from Qatar and on LNG cargoes passing through the Strait of Hormuz, Jørgensen said.
EU security assessments present conflicting views on supply stability. EU Commission spokesperson for energy issues Anna-Kaisa Itkonen stated that the EU is less concerned about supply security than about high energy prices. According to Itkonen, EU member states have sufficient reserves of oil and natural gas, and the immediate impact of the Middle East conflict on energy markets remains limited short-term, thanks to the EU's diversification strategy. She added that the situation is under control in Europe and remains stable.
Emergency reserves provide some buffer. All EU countries have emergency oil reserves sufficient for 90 days, according to Itkonen. No EU member state has released these reserves so far. Strategic natural gas reserves and storage levels remain high in the EU and are sufficient to cover the rest of the winter, she confirmed.
The EU continues diversifying its energy sources away from Russia. The EU remains committed to its ban on Russian gas purchases; reliance has fallen from 45% to 10% and is expected to drop to zero, Jørgensen said. The EU is exploring new energy sources from Azerbaijan, Algeria, Canada, and others. According to Itkonen, the EU's largest natural gas suppliers are Norway via pipelines and the United States via LNG, and the EU does not import oil or natural gas from Iran.
Policy responses are being prepared at the EU level. The European Commission is preparing a comprehensive support package to help businesses and households, according to officials. The Commission will unveil measures soon, including ways to decouple gas prices from electricity prices and a possible cut in electricity taxes, Jørgensen said. The European Commission is expected to present an 'energy package for citizens' tomorrow in Strasbourg, according to reports.
We need a coordinated response to the crisis, but the capitals should be driving the measures.
Revenue measures targeting energy companies are under consideration. The European Commission is considering a tax on excessive profits from the oil and gas industry. The Commission is under pressure from Austria, Germany, Italy, Portugal, and Spain to consider measures to curb excessive profits of energy companies. A windfall tax on energy companies remains a possibility, Jørgensen noted.
National responses have been fragmented across member states. Several EU countries have introduced tax cuts on fuels or price caps, costing €9 billion according to a study. Poland introduced a price cap on petrol stations and reduced VAT on fuel from 23% to 8%. Slovenia adopted a fuel rationing policy, becoming the first EU country to implement such a measure.
Additional national interventions continue to emerge. Spain reduced VAT on fuels from 21% to 10%. Austria has cut fuel taxes and introduced limits on retailer profit margins. According to multiple reports, Sweden has proposed reducing the tax on petrol and diesel to the EU minimum level from May 1.
Demand reduction strategies are being recommended. Countries may consider measures to curb demand, such as fuel rationing, remote working, and car-free Sundays, Jørgensen suggested. The more that can be done to save oil, especially diesel and jet fuel, the better, he emphasized. EU countries should follow the International Energy Agency's advice, including working from home, reducing highway speeds, encouraging public transport, and increasing car-sharing, Jørgensen added.
Storage strategy is being revised for future security. EU countries should begin refilling gas reserves earlier than usual to avoid last-minute price spikes, Jørgensen urged in a letter. According to multiple reports, the EU Commission urges member states to reduce gas storage filling targets and gradually fill reserves. Jørgensen suggests a target of 80% of gas storage capacity, 10 percentage points below the EU's official target.
Coordination challenges persist among member states. EU energy ministers met via videoconference on Tuesday to discuss possible steps to curb rising energy prices, but no joint response emerged. Closely coordinated action among all EU member states is necessary to avoid fragmented national responses, Jørgensen stressed. According to multiple reports, no concrete decisions were made at the video meeting, but the EU Commission is expected to propose new support measures later this week.
Political tensions exist between national and EU-level approaches. According to Euronews, Polish energy secretary Wojciech Wrochna described that EU capitals should be driving the response to the energy crisis. In a letter, Jørgensen urged member states to avoid measures that could increase fuel consumption. This indicates a discrepancy between the Commission's public reassurance and the more urgent warnings from its energy commissioner, potentially affecting public and market confidence.
Key uncertainties remain about policy implementation and conflict escalation. It is unclear whether the European Commission will implement a windfall tax on oil and gas companies' excessive profits. The specific details and timeline of the EU's upcoming support package for businesses and households have not been finalized. How long the Strait of Hormuz will remain closed and its full impact on global oil supply is unknown, and whether EU member states will coordinate their responses effectively or pursue fragmented national measures remains to be seen. According to multiple reports, Iran responded by threatening additional energy infrastructure in the Gulf States and desalination plants, while Trump announced he wouldn't strike energy infrastructure for five days, leaving open the potential for further escalation in the Middle East conflict and its additional effects on energy markets.