BERLIN
Sharply rising energy prices amid the ongoing military tensions in the Middle East, deepened by joint US and Israeli attacks on Iran and Tehran’s subsequent retaliations and the effective closure of the Strait of Hormuz, brought a serious economic crisis to Europe.
With shipments at a standstill and disruptions in global energy flows, European countries are scrambling to implement comprehensive measures to subsidize energy costs and shield economic stability.
Contracting energy supply pushed up fuel prices over the €2 ($2.32) threshold in some European countries, fueling cost pressures across all sectors.
Since the US-Israeli airstrikes on Iran began on Feb. 28, Brent crude oil has climbed as high as $119 per barrel, making energy Europe’s top priority.
Tehran’s retaliation on Qatari facilities, one of the world’s largest liquefied natural gas exporters, deepened supply concerns.
Tightening energy supply impacted gas prices at the pump, with the economic cost of the Iran war affecting European consumers.
Particularly in Germany and some other European nations, gas prices exceeding $2.32 per liter have fueled social unrest, while energy-intensive sectors are struggling to operate under the pressure.
The European Commission is working on new incentives and price monitoring mechanisms under the Citizens’ Energy Package.
European Commission President Ursula von der Leyen said during the March 19 EU leaders’ summit in Brussels that the European energy sector felt most of the war’s direct impact, urging member states to take action.
She said the measures taken for energy prices in the EU have to be temporary, targeted, and tailored to the situation.
European Council President Antonio Costa said the rising gas prices have to be alleviated with urgent measures, and that the European Commission is ready to prepare targeted and temporary measures specially tailored for each member state’s differing needs.
Meanwhile, the International Energy Agency said the world is facing one of the deepest energy crises ever, calling for radical conservation measures from the general public, such as working from home or driving slowly to reduce oil consumption.
Governments across Europe are making critical decisions one after another to ensure energy supply security, with Germany managing the process via market oversight and transparency.
Berlin decided to allow gas stations to change their prices only once per day at midnight local time to make it easier for drivers to track the prices, while cartel inspections have been tightened, and antitrust bodies are granted broad powers to ensure market competition.
Italy decided to provide a €0.25 ($0.29) per liter tax reduction on gas, as Prime Minister Giorgia Meloni established a mechanism to link gas prices at the pump to the barrel price of crude oil, while the Italian financial ombudsman, nicknamed “Mr. Prezzi” (Mr. Prices), launched inspections to combat price speculation.
Meanwhile, France decided to focus on case-by-case direct aid to critical sectors like transportation and fishing rather than a general cut, as the country has limited room for maneuver amid public debt reaching 117% of its economy.
The UK’s energy regulator Ofgem is reportedly expected to raise the annual price cap from $2,200 to $2,882 in July, while British Finance Minister Rachel Reeves is working on targeted aid models to cut value-added tax (VAT) and environmental taxes for the most vulnerable households.
Meanwhile, one of the most comprehensive initiatives has come from Spain, with Madrid’s left-wing coalition government reaching an agreement on a $5.8 billion support package to mitigate the economic impact of the war, reducing the VAT on gas, diesel, natural gas, and electricity from 21% to 10%.
Spanish Prime Minister Pedro Sanchez announced a direct subsidy of $0.23 per liter on fuel prices for transport firms, farmers, and fishers.
Spain’s package includes a total of 80 separate measures covering rent regulations alongside energy.
These measures include items such as the extension of expired lease agreements for low-income families and protective measures for households unable to pay energy bills, which ensure their electricity and gas services are not cut off.
Spain’s fuel prices, with gas at $1.98 per liter and diesel at $2.13, are lower than countries like Germany, and despite the lower prices, Madrid is awaiting the implementation of the tax cut reduction.
Meanwhile, eastern and southeastern European countries are also seeking to implement direct measures to curb price hikes.
Hungarian Premier Viktor Orban said the country capped the price of gas at $1.77 per liter and diesel at $1.83.
Croatia, Albania, and Kosovo’s retail prices have been capped, with their oil firms’ profit margins brought under control, while Greece decided to cap profit margins on fuel and basic food products for three months.
* Writing by Emir Yildirim in Istanbul.