The EU’s second major energy crisis in four years underscores the bloc’s fossil fuel vulnerability

Nearly two months since the war in the Middle East first broke out, the Strait of Hormuz remains closed to almost all traffic, despite an ongoing ceasefire and negotiations to reopen the critical chokepoint that locked up one fifth of the world’s oil and natural gas supply in the Persian Gulf. In that time, the EU’s energy bill has skyrocketed. In the first 52 days since the conflict started, rising oil and gas prices have forced the bloc to spend an additional €24 billion (around $28 billion) on fossil fuel imports compared to previous levels, according to calculations from the European Commission. 

That accounting was part of a Commission report published Wednesday outlining the EU’s strategy to navigate what the International Energy Agency recently called the biggest energy security threat in history. The measures include a familiar dose of policy prescriptions to regulate energy demand, but also call for a long overdue rethink of Europe’s energy system, one that focuses on homegrown sources rather than reliance on fossil fuel imports from hostile neighbors or geopolitical hotspots.

“The choices we make today will shape our ability to face the challenges of today and the crises of tomorrow,” Ursula von der Leyen, the Commission’s President, said in a statement.

Europe has been here before. In 2022, a major policy package was designed to maneuver an end to the EU’s dependence on Russian fuel imports. The plan succeeded in part, as the bloc has significantly scaled down the share of Russian energy products in its energy mix. But in the middle of yet another generational energy crisis, its second in four years, dependence on foreigners for much of the EU’s energy needs has returned to haunt the continent.

Tried-and-tested strategy

The EU’s plan to weather the current energy crisis relies in part on mechanisms already trialed four years ago. One strategy is to promote energy savings across the bloc and reduce demand for fossil fuels, including by retrofitting existing structures to be more energy efficient and providing vouchers for residents to replace gas-powered boilers at home.

It’s still a far cry from the energy rationing imposed during the early days of the Ukraine invasion, but European leaders have discussed more severe contingency measures internally. Last month, EU energy chief Dan Jørgensen advised member states to implement “voluntary demand saving measures” to reduce oil and gas use, particularly for transport purposes, Politico reported.

The worst-case scenario would be so-called demand destruction, a permanent suppression of energy spending due to persistently high prices. This possibility was floated during a closed door meeting of EU ambassadors last week, reported by Reuters. Officials reportedly argued that a prolonged energy crisis would threaten the continent’s energy reserves headed into next winter, in which case member states would be forced into reducing their fuel use.

In the more immediate term, the Commission’s energy plan also proposed reshaping the bloc’s energy tax system to incentivize electrification over fossil fuels. Proposed changes to the continent’s tax policy would affect electric vehicle purchases and reduce home electricity taxes to shield consumers. The Commission also recommended incentives to install heat pumps, solar panels, and battery storage in residential and industrial buildings.

Self-sufficiency dream

The primary goal of the EU’s plan, however, is to accelerate the bloc’s shift towards renewable power, and wean itself off foreign imports entirely. 

“We must accelerate the shift to homegrown, clean energies,” von der Leyen said in her statement. “This will give us energy independence and security, and mean we are better able to weather geopolitical storms.”

The continent itself is a small fossil fuel producer, and has historically relied on imports to satisfy most of its energy production needs. Since Russia’s invasion of Ukraine, the EU has successfully scaled its solar and wind power sector, which last year combined to produce more electricity domestically than fossil fuel sources.

But other areas of the economy have been harder to electrify, such as transportation, heating, and heavy industry, all of which continue to rely on gas and oil. Since 2022, the EU has pivoted from Russia as a trading partner to the U.S. and Middle East, and its vulnerabilities are being laid bare. In 2022, the EU imported a record 62.5% of its energy from abroad. When the war in Iran started, the EU still derived 57% of its energy from imported fossil fuels, according to the Commission report.

The latest strategy laid out measures to accelerate the EU’s clean power shift and reduce reliance on imports. These include more funding to upgrade the bloc’s grid network and transmission lines, incentivizing production and use of biofuels and sustainable jet fuel, and expanding the role of non-fossil fuel energy sources such as nuclear. 

Four years ago, the EU received a crash course in the perils of foreign fossil fuel dependence. It is now being forced to relearn some of those lessons.