The European Union has not announced any emergency measures on energy so far. The European Commission is working on a set of measures to address electricity prices in Europe. Energy subsidies and tax cuts are increasingly becoming more popular in Europe to address the situation in the short and medium-term.
Australia is one of the latest countries which is reportedly facing a fuel crisis with fuel stations in various states including in New south Wales and Victories running out of diesel and unleaded. Prime Minister Anthony Albanese announced fuel tax cuts.
On a long-term trajectory, the EU Commission will be rolling out further investments to further integrate the European energy grid and increase its efficiency. There are early talks and discussions on increasing Europe’s energy production but there are no concrete proposals in this regard. UK Opposition Leader Kemi Badenoch is proposing to renew UK oil and gas production in the North Sea.
Physical crude oil prices are increasing and are up to $140 for instant delivery and up to $103-110 for delivery by end of month.
European gas prices went to a yearly high of €60.15 per Mwh on March 19th but have now subsided to €50. QatarEnergy gas deliveries to Europe have been suspended until June. European gas storage levels are below mean levels indicating supply constraints in times of crisis. Spain is currently the only country in Europe with higher than average gas storage supplies.
On the other hand, the price of US natural gas remains unaffected with the crisis with futures closing at $2.84 last Friday. The US also supplies more than half of the EU’s gas imports and these have been increasing gradually even this year, indicating a very likely possibility that Europe can tap more gas supply from the US.
More cargo ships have begun passing through the Strait of Hormuz but these new passages are not impacting energy prices so far. Iran is still targeting energy facilities across the Gulf and many oil tankers are stranded outside the Strait waiting to enter. The war in Iran is set to continue as the Iranian regime denies that it is negotiating with the US government.
Oil prices are trending higher due to immediate supply shortages as the Strait of Hormuz remains blocked and energy facilities in the Gulf remain under attack. At the same time, Saudi Arabia has been rerouting oil exports to the Red Sea via the Yanbu oil terminal. At the same time, oil supply issues are also increasing with the ongoing attacks by Ukraine on Russia’s oil industry. The Russian oil terminal of Ust-Luga is still mostly offline – this affects countries like India and Egypt which remained buyers of Russian oil despite sanctions.
There are currently no fuel shortages in Europe.
In reality, Europe receives only small amounts of its oil from the Persian Gulf and the closure of the Strait of Hormuz would not severely impact European oil supplies. A prolonged closure of the Strait would impact global supply leading to potential oil supply shocks in Europe. Such shocks are meant to be very temporary if they happen at all, as other countries ramp up their oil production to take opportunity of high oil prices.
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