Oil prices continued to climb, on concerns about shrinking oil supplies after Russia warned that repair work at a facility near a port in the Black Sea would take up to two months, which could cause oil production to fall. Russian exports fell by 1 million BPD. Gas prices also increased sharply after Russian President Vladimir Putin announced that Moscow would only accept payments in rubles for "unfriendly countries" to import gas from Russia, including the EU.
Geopolitical developments have strongly affected the “black gold” market and forced EU countries dependent on Russia's energy supply to face difficult problems ensuring energy security. At the recent informal meeting in Versailles (France), EU leaders agreed to phase out dependence on Russian gas, oil and imported coal as soon as possible.
The European Council will discuss the persistently high energy prices and their impact on people and businesses. The European Commission (EC) will provide the basis for the discussion by proposing ways to make energy prices affordable while ensuring supply security. One of the EU’s current top priorities is to reduce strategic reliance in sensitive commodities and sectors, such as critical raw materials, semiconductors, food, healthcare and digital products.
The EU Commissioner for Energy admitted that the global and European energy markets are in turbulent times, especially since the conflict in Ukraine. Therefore, Europe needs to act quickly to secure energy supplies for next winter and relieve the pressure of “energy bills” on people and businesses.
The EC has proposed filling up gas reserves before next winter. Accordingly, the minimum gas reserve level of 80% will be applied in November and this level will be raised to 90% after that. A special working group has been established to work closely with countries and key players in the field to regulate gas purchases and confirm storage. This coordination will help diversify the EU supply.
In preparation for plans to reduce dependence on Russian supply, the EC has also discussed with major gas producing countries, such as Norway, the US, Qatar and Algeria. The EC President also met with leaders of major energy corporations in Europe, such as E.ON, Shell, Vattenfall and Eni. It is expected that next May, the EC will announce a detailed plan on giving up Russian fossil fuels by 2027. Meanwhile, member states are working to quickly contain soaring energy bills and look for alternatives in case of supply disruptions from Russia.
The EU has suggested that member states can buy gas together to increase supply, but the EU also warned that trying to limit wholesale prices could undermine efforts to transition to green energy. The EC considers other options, such as capping electricity prices and using generators to resolve the difference between the ceiling price and the market price. However, the EC warned, limiting electricity prices could also undermine investment in new renewable energy production.
Given the fact that Europe depends on Russia's supply, which accounts for 40% of the total gas consumption in the Old Continent, many countries throughout the region declared that in the short term it is not possible to give up Russian gas imports. The elimination of dependence on gas supplies from Russia takes time and cannot be completed quickly. A strategy to ensure energy security continues to be a headache for the EU to find a solution.
