The decision by the International Energy Agency to release 400 million barrels of oil from strategic reserves on Tuesday had only a temporary calming effect on oil prices. So far, there are no signs that Europe will be hit by a 1970s style oil shock with catastrophic economic consequences, but uncertainty over the direction and outcome of the US-Israeli attack on Iran means that economic trouble could still lie ahead.
As a major energy importer, the EU is exposed here, raising risks of a short-term rise in oil and gas prices and also underlining longer-term questions of wider energy security. Earlier this week, Eurostat released the latest energy consumption figures for the EU. In 2024, the EU imported 57 per cent of its energy needs. The figures show that Ireland was an outlier, with 80 per cent of energy consumption coming from oil and gas imports.
The conflict in the Middle East does not threaten Europe’s security of supply, with most of its natural gas coming from Norway and liquefied natural gas from the US. The EU relies on the Middle East for less than 10 per cent of its oil. But by cutting world supply the crisis is pushing up energy costs for households and businesses, leading to political pressure for governments to respond.
With the markets in flux and the course of the conflict uncertain, EU governments would be wise to take their time in responding directly to higher prices, beyond ensuring no immediate hit to the worst-affected poorer households.
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But the crisis also underlines the need to increase the EU’s energy independence to underpin security of supply and also make Europe less exposed to price swings in future by reducing its reliance on imported fossil fuels.
Chris Wright, the US energy secretary, travelled to Europe in February and criticised the EU’s Green Deal, which is a flagship policy of the European Commission and commits the region to becoming carbon neutral by 2050. He echoed many of Donald Trump’s talking points, claiming that the effects of climate change were exaggerated and not linked to fossil fuel usage.
The EU must reject this argument. There is clear evidence fossil fuels contribute significantly to global warming. And developing alternative sources can provide a cleaner – and potentially cheaper – source of energy, lessening exposure to swings in fossil fuel prices.
The fall-out from the conflict in the Gulf gives EU governments – including the Irish one – the opportunity to underline this point. But to do so they need not only to undertake the substantial body of work needed to develop alternative sources, but also show how this will work for consumers. A credible transition plan of how to get there is also vital. Ireland, which is years behind on its plan to develop offshore wind, faces a particular challenge of credibility in this area.
