‘No silver bullet’: Energy crunch could bite Europe this winter
Price-gouging checks at petrol stations and electric vehicle grants for French taxi drivers among Continent’s responses to global energy shock
A man prepares to fill up his car at a petrol station in Brussels. Photograph: Nicolas Tucat/AFP via Getty Images
For the first time in months there’s a nip in the air around Brussels. The hottest summer on record in western Europe, which brought deadly wildfires and heatwaves, has made way for what could be a difficult winter dominated by high energy prices.
European governments are trying to soften the blow from that energy shock. Most interventions were budgeted for on the assumption the world economy needed to weather a short blockade of the Strait of Hormuz, the key shipping artery that brings oil and gas from the Gulf.
The United States has been unable to extract itself from the war Donald Trump started in Iran, or break the chokehold Tehran quickly put on the strait that has sent fuel and energy costs shooting up.
Europe is “not far behind” the US, where a barrel of diesel is up 94 per cent on pre-war prices, the International Energy Agency (IEA) said in a report last month.
The shock has been compared to the 1973 oil crisis but we haven’t seen anything close to the shortages and gas rationing from that period. The IEA says that’s in part because strategic reserves have helped to keep the energy market from really running away, for the moment anyway.
Iran’s strikes on US-aligned countries in the Gulf have done serious damage to the region’s oil and gas production facilities, which will take years to return to full steam.
The European Union’s 27 national leaders meet in Brussels for a two-day summit beginning today. The energy crunch will feature in discussions. “This is one of the main political concerns for the leaders”, said a senior EU official involved in backchannel talks laying the groundwork for the European Council summit.
“There is no one silver bullet to lower energy prices,” the top adviser said.
Petrol prices of more than €2.40 a litre at an Esso petrol station in Lyon, France, on October 10th. Photograph: Quentin de Groeve/Hans Lucas/AFP via Getty Images
Leaders also have to contend with the Iran fallout spilling into the fighting in Ukraine. Trump’s relationship with Ukrainian president Volodymyr Zelenskiy has suffered a fresh rupture over Kyiv’s bombing of Russian oil plants.
Closer to home, European leaders know that a sustained spike in the cost of fuel, heating bills, and the wider inflation rate is bad news for their electoral prospects.
More than seven months into the energy crisis, the response from national governments has been a mixed bag, including cuts to tax charged on fuel, subsidy supports and other schemes.
Poland and Croatia put a cap on the price at the pumps and Austria has restricted filling stations to a single price hike a day. Sweden cut public transport fares for the year.
At the start of the crisis Slovenia called in the army to help transport fuel and for a couple of days even instituted fuel rationing, limiting people to 50 litres a day.
France has a €100 fuel allowance voucher for workers who heavily rely on their car and taxi drivers can access a grant to help them to buy an electric vehicle. Czech authorities have been monitoring petrol stations for evidence of price gouging. Italy plans to delay the shutdown of coal-fired power plants by a decade, until 2038.
Others have doubled down on their move away from fossil fuels. Spain, a leader in renewables, wants to designate local areas where green energy projects can be fast-tracked.
Madrid has said future pressure on the power grid from energy-hungry data centres must be offset by additional renewable infrastructure.
Seeking relief for the aviation sector, Irish Minister for Transport Darragh O’Brien privately asked EU energy commissioner Dan Jorgensen to consider suspending tariffs on sustainable aviation fuel imported from the US, in response to “significant and sustained volatility” in the jet fuel market. The April 24th letter was released by his department in response to a Freedom of Information Act request from The Irish Times.
Latvia’s government is exploring a national “solidarity” levy to collect 100 per cent of “excess” profits fuel retailers make above a certain threshold. Portugal is drafting a bill to tax the windfall profits of energy companies.
Germany is leading a group of member states pressing Brussels officials to propose an EU-wide tax on windfall profits booked by oil companies, without much success so far.
The broad thrust of national interventions have been to ease the cost of filling up a motor tank. Heading into the colder period the focus will shift to home heating and electricity bills.
The obvious worry is the pressure on energy costs will stretch well into next year, exhausting what limited fiscal room many European governments have to dig into stretched national budgets. It could turn into a rough few months.
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