EU countries have already spent €9 billion in their efforts to shield citizens from the energy price spikes triggered by the six-week US-Israeli war on Iran, the Jacques Delors Institute said on Thursday.
The French think tank said the global supply squeeze – a quarter of the world’s oil and a fifth of its LNG used to pass through the Strait of Hormuz – had already added €13 billion to the EU’s import bill since the war began.
Missile strikes have damaged crucial energy infrastructure in the Persian Gulf, and Tehran has effectively blockaded the only waterway to the petroleum-rich sea.
“Although the implementation of a two-week ceasefire has been agreed, it must not give European policymakers the illusion of partially restored security, or of a return to a business-as-usual scenario,” the coordinators of the research wrote.
“Without a swift return to normalcy, current measures risk entrenching consumer habituation to subsidized prices,” the think tank warned.
The authors suggested governments were largely motivated by fear of a public backlash, creating “strong political incentives” to keep subsidising energy, even if the measures are costly and carry well-known risks.
Among these, the price caps implemented by nine EU countries “suppress demand signals, creating the conditions for shortages,” the think tank wrote.
Commission ignored
In total, the Delors Institute found that of the 22 EU countries with active price-taming policies, 21 activated “broad support measures” and just 11 set up “targeted assistance”.
All of them, however, have de-facto ignored the recommendations of the European Commission and the International Energy Agency to cut fossil fuel use.
The think tank urged the EU to call an extraordinary energy ministers’ summit to decide mandatory temporary targets to reduce fossil fuel consumption, and coordinate their action.
The institute also recommended that all EU countries enact an electrification plan, lift price-freezing measures on oil and gas, and “consider a European-level windfall profit tax” on energy companies.
Should the latter be the next move, as proposed by Austria, Germany, Italy, Spain and Portugal last week, then all the revenues should be used to electrify the energy consumption of households, industry and motorists rather than “price caps or untargeted measures”, the think tank argued.
(rh)
