Oil and gas prices will not return to pre-war levels soon even if the conflict in the Middle East were to end today, Dan Jørgensen, European Commissioner for Energy and Housing, has warned.
In the month since the beginning of the war in Iran, prices in the EU have jumped by about 70% for natural gas and by 60% for oil, Jørgensen said at an informal meeting of EU energy ministers.
In financial terms, 30 days of conflict have already added $16.2 billion (14 billion euros) to the EU’s fossil fuels import bill, the commissioner added.
“We should be under no illusion that the consequences of this crisis for the energy markets will be short-lived. Because they won’t,” Jørgensen noted.
“While there are no immediate oil and gas supply shortages for in the European Union, we see tightening in certain product markets, notably diesel and jet fuel, as well as increasing constraints in global gas market and its spill-over effects into electricity prices,” he said.
The de facto closure of the Strait of Hormuz has stranded all Qatari and UAE supply of LNG. Additionally, Qatar’s LNG capacity has been severely damaged by Iranian missile attacks, which forced state firm QatarEnergy to declare force majeure on contracts and start quantifying the losses.
As a result, Asian buyers are outbidding Europe for spot LNG supply, leaving Europe with the very difficult task of refilling gas storage sites during the summer to prepare for next winter.
“From the Commission side, we are already coordinating actions on gas storage refilling and oil security of supply,” Jørgensen said.
“And here my message is very clear: Better to be prepared than to be sorry.
We are also working on a toolbox of measures which we will present soon to support Member States in shielding families and businesses alike.”
European nations depending on gas for electricity, as well as Europe’s industry, are already suffering the effects of the new energy crisis.
By Tsvetana Paraskova for Oilprice.com
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