Transcription
The Iran war energy crisis is worse than the crisis of 1973 and 2022 combined, says EU's energy chief Dan Jorgensson.
European Union Energy and Housing Commissioner Dan Jorgensson has warned that Europe is staring at years, not just months, but years of elevated energy prices even in the most optimistic scenario. And this is due to the Iran war continuing to impact global energy markets and the damage across the Gulf infrastructure being critical.
Now, even if peace is declared tomorrow, he says, we're facing weeks, months, and even years of difficulties when it comes to energy prices. What's quite ironic is that Jorgensson ruled out any return to Russian energy imports, even in the event of a Ukraine peace deal. So hopefully Europeans are watching this and preparing for higher energy costs and with that for higher prices in general for years and years to come.
Because even though the EU decreased reliance on Russian energy, it has become what many would argue a full vessel of the United States and with that fully dependent on American energy. Europe is once again facing a very familiar and very uncomfortable reality, which is another energy crisis and a rapidly growing bill.
Since the start of the US and Israel illegal war against Iran, the European Union has spent an additional 24 billion euros, which roughly translates into 28 billion on energy imports. That actually breaks down to more than half a billion dollars every single day. And, uh, what makes it worse is that this money hasn't actually bought any extra energy for Europe. It's simply the cost of higher energy in general. It's simply the cost of higher global prices. So this serves as yet another reminder of how exposed Europe remains to external shocks and how fragile its economies are.
Qatar Energy, for example, declared force majeure on its contracts last month and it is still quantifying its losses. While the de facto closure of the Strait of Hormuz due to the US blockading the strait has stranded much of the Gulf's LNG supply and left Asian buyers outbidding European purchasers for spot cargos.
This situation comes less than 4 years after the 2028 crisis that was triggered by Europe unilaterally cutting off Russian energy. Remember, Russia said that it would supply energy to Europe and Europe said, "Well, well, actually, we don't want this." So, Europe actually cut itself off of Russian energy because it wanted to inflict enormous economic harm to Russia. And look what happened. It backfired.
Today, the source of disruption is very different, but the vulnerability is the same. The current EU energy crisis is being driven in large part by the instability in the Strait of Hormuz, uh, which is, of course, one of the world's most critical choke points for oil and gas, with flows through this narrow corridor effectively halted due to, uh, the blockade by President Trump.
Global energy markets have reacted very quickly. Prices are rising, volatility is increasing, and uncertainty is spreading across regions. While the possibility of a global depression, we're not talking about a recession, we're talking about a global depression here, the possibility of a global depression continues to mount if the disruption persists.
Now, in response, the European Commission has recently unveiled a set of emergency measures that are designed to cushion the economic blow without overreacting. Rather than repeating the sweeping interventions of 2022, such as price caps and windfall taxes, Brussels is now taking a more targeted approach. And that's, that's the official language, targeted approach.
Among the key proposals are significant reductions in electricity taxes, uh, potentially dropping them to zero for certain industries, in addition to income support and energy vouchers to help households cope with rising costs. The commission is also planning to establish a pan-European system to monitor fuel shortages, particularly jet fuel and diesel, and to coordinate emergency responses, including the sharing of supplies between member states.
The focus on jet fuel highlights just how fragile certain sectors have become as the result of the EU's own policies. Remember, the EU is not a victim here. The EU chose to cut off a reliable energy source, um, back in 2022, and it chose to completely cut it off by 2027. And now the EU is laying in the bed that it has made for itself.
Europe imports roughly 70% of its jet fuel, and industry groups are already warning that shortages could emerge within weeks if disruptions persist. The impact is already visible. Lufthansa has announced plans to cut 20,000 flights through October, citing a doubling in jet fuel prices since the conflict began. A sustained reduction in air travel would actually not only disrupt mobility but also deal a significant blow to tourism-dependent economies across the continent.
Now, beyond aviation, the economic strain is spreading across industries as well. European fishermen, for example, are being forced to halt operations as rising fuel and material costs wipe out their margins. In response, the EU has activated crisis mechanisms to provide direct financial support to those affected. But needless to say, it's not going to be enough to make up for the loss in revenue.
Meanwhile, major manufacturers across Europe are passing on higher costs to their consumers because that's how businesses work. They're not going to absorb a hit to their bottom line. They're going to have to deliver to their shareholders and they're going to, of course, pass on those additional costs to consumers. Companies like BASF, for example, have increased prices on a wide range of products already, from industrial chemicals to household goods, sometimes by more than 30%, according to reports. These increases ripple through supply chains, pushing up costs for businesses and for households as well.
The broader economic outlook is also beginning to darken already. Industry groups warn of declining orders, unprofitable operations, and the growing likelihood of planned shutdowns and job cuts, particularly in energy-intensive sectors like chemicals. Economists caution that if the war continues and energy disruptions deepen, Europe could actually slide into a deep recession.
Major institutions have already downgraded growth forecasts for the Eurozone and the United Kingdom too, signaling that the damage is no longer hypothetical. It is already unfolding. It is very, very real, and it is getting worse.
If disruptions in global energy flows persist or escalate, particularly through critical routes like the Strait of Hormuz or the Bab el-Mandeb, Europe could face a much sharper supply shock. Europe now stands at a critical crossroads, I would say, with energy costs surging, supply routes under pressure, and long-term alternatives still being very vague. The crisis is no longer temporary. It is structural. Even in the best-case scenario, as I said, years of elevated prices and economic strain appear inevitable. So, you should be preparing for that.
The EU's strategy may be to buy time, but, uh, it certainly cannot eliminate its deep exposure to global energy shocks. And if disruptions persist in key choke points, as, uh, appears to be the case right now, the situation could escalate into a far more severe economic downturn.
If you are in Europe, I would love to hear from you. Let us know in the comments below what are you seeing? What are you hearing? What is the price of, of gas right now? We would love to hear from you. Let us know in the comments below your thoughts on this issue. Thank you very much for watching. I certainly appreciate you being here. Remember to connect with me on Substack or Patreon to stay connected, just in case. And I will see you back here tomorrow.