Vienna - Thursday, October 16 2014
by Dennis Heumann, President of the European Commission. (Chair of the European Council Committee)
Amid continued fighting in Syria and Iraq, many consumers feared that this could lead to a supply disruption of oil and gas, or even a rise in prices. Yet quite the contrary has happened: prices of oil and gas have been steadily declining over the last few months.
Oil prices have taken a tumble and crashed below the $90 mark early last week, and as of the publication of this article, crude oil stood at $88.83 (WTI), according to Bloomberg LP.
There are various explanations and arguments as to why the oil price has declined so steeply in recent months, with the most basic being that there is simply an over-supply and shrinking demand. The fracking revolution has decreased US imports of fossil fuels, and Europe’s poor economic performance in the last 3 quarters has decreased demand.
This has allowed for some reassurance to consumers, but political leaders must not ignore the underlying problems that Europe still faces. While we are currently well-supplied, we must equip ourselves for the future and continue to diversify our energy sources.
Europe currently produces 57% of its primary energy mix from petroleum and gas, and imports roughly 50% of those fuels. While Russia is clearly still the leading source of imports (both natural gas and crude oil), the EU imports roughly 30% of crude oil from the Middle East and similar quantities of natural gas.
Therefore, the EU must do everything in its power to further de-escalate the crisis in Syria and Iraq. The European Commission will continue to follow its strategy of diversification, but Member States must also actively prevent the conflict from intensifying. The situation in Iraq and Syria, should it spill over into other countries, would be devastating to the European Union.
While the crisis in Ukraine is ongoing and unresolved, the European Union might soon find itself battling an energy crisis on two fronts. Should both crises become full-blown, the European Union will be faced with the largest energy crisis in history, much more severe in consequences than in ’73 and ’79.
Member States of the European Union should be prepared to act on these latest developments and ignore the low oil prices for now, which could change very quickly if either of the two crises escalate.