EU Warns of Lasting Energy Strain Despite Iran Deal

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EU Warns of Lasting Impact on Energy Markets

Soaring oil and gas prices triggered by the ongoing war involving Iran are unlikely to normalize in the near term, even in the event of an immediate cease-fire, the European Union’s energy commissioner cautioned on Tuesday.

Commissioner Dan Jørgensen said that while the 27-nation bloc is not currently facing acute shortages of oil and gas, diesel and jet fuel supplies are under pressure. He also pointed to “increasing constraints” in global gas markets that are feeding through into higher electricity prices across Europe.

“What I find extremely important is to state as clearly as I can that even if that peace is here tomorrow, still we will not go back to normal in the foreseeable future,” Jørgensen told a news conference following a meeting of EU energy ministers.

Rising Costs and Market Pressures

The commissioner noted that the European Commission is preparing a series of initiatives to support households and companies facing sharply higher energy bills. Since the start of the war, gas prices in Europe have climbed by about 70% and oil prices by about 60%, according to Jørgensen.

These moves in commodity prices have pushed the EU’s overall bill for imported fossil fuels higher by €14bn during the same period, he said.

Jørgensen stressed that the EU must respond in a coordinated way to avoid a patchwork of national measures that could distort markets. He said joint action is needed to “avoid fragmented national responses and disruptive signals to the markets”.

Planned Policy “Toolbox” and Possible Tax Measures

The European Commission’s forthcoming “toolbox” of measures, which Jørgensen said will be presented “quite soon”, is expected to include mechanisms to help separate gas prices from electricity prices, in an effort to limit the spillover of gas market tensions into power bills.

He added that a reduction in electricity taxes, as floated by Commission President Ursula von der Leyen, is also under active consideration.

Looking back to the 2022 natural gas crisis, Jørgensen said he does not anticipate a repeat of that episode, when companies generated significant profits from price spikes. However, he emphasized that a one-off “windfall tax” on such companies “remains a possibility” if needed.

According to Jørgensen, current market conditions present “good opportunities” for member states to channel financial assistance to vulnerable households and to industries experiencing “extraordinary stress”. He said the Commission intends to make “these possibilities even simpler and broader” for governments to deploy.

Demand-Side Measures and IEA Guidance

Beyond direct financial support, Jørgensen urged EU countries to look at the International Energy Agency’s 10-point plan as a framework for reducing energy demand. That plan, he said, includes measures such as working from home, lowering motorway speed limits, promoting public transportation and expanding car-sharing initiatives.

Shift Away From Russian Gas Continues

Jørgensen reaffirmed the EU’s commitment to its ban on Russian gas purchases. The policy is designed to reduce the bloc’s reliance on Russian energy and to cut off funding streams for Russia’s war in Ukraine.

He reported that the EU’s dependence on Russian gas has declined from 45% before the war to 10% now. The share is expected to fall to zero as imports from other providers grow, especially from the United States. The EU is also looking at new supply options from Azerbaijan, Algeria and Canada, along with smaller producers in other regions.

The commissioner cautioned that the bloc must not “repeat the mistakes of the past by allowing Putin to weaponise energy against us and blackmail member states”.

He added that “it would be totally unacceptable” for the EU to continue purchasing energy that would “indirectly help finance the terrible war that Putin is waging in Ukraine”.