Europe's Energy Crisis: Will Everything Change After Getting Through This Winter?

Market electricity prices typically take six months to one year to be passed on to residential consumers. In Europe, aside from Norway and Spain—where a relatively high proportion of households sign spot contracts—residents in most other countries prefer long-term gas and electricity supply contracts, such as one- or two-year agreements. Starting in April–May 2022, end-user energy prices rose noticeably, surpassing the EU’s average electricity price of €0.23 per kilowatt-hour in 2021. According to the European Commission’s Q3 2022 Electricity Report, half of retail electricity contracts are indexed to market prices—meaning more contracts will soon expire, exposing more consumers to higher renewal prices. Figure 4: Relative increase in residential electricity prices in major European cities since 2015 The impact of rising electricity prices varies across income groups. IMF data shows that in the UK, low-income households spend approximately 17.8% of their total household expenditure on energy, compared with just 6.1% for high-income households. Higher energy costs directly squeeze basic living expenses for vulnerable families—such as those relying on pensions or welfare payments—with monthly budgets ranging from €1,000 to €2,000. A €100 increase in energy bills may force such households into an agonizing choice between “heating or eating.” Even in Norway—a country with strong social welfare and relatively even income distribution—rising electricity prices have affected households. A survey by the Norwegian Institute for Consumer Research found that 28% of households reported increased financial pressure since January this year; 25% said higher electricity bills had made it harder to pay bills and mortgages. Meanwhile, central banks across Europe have raised interest rates to combat inflation, further increasing household debt-servicing costs and reducing disposable income. “Relief for Everyone” In response to the escalating energy crisis, the European Commission and member states have held successive emergency meetings and rolled out policy packages focused on demand reduction, price caps, subsidies, and windfall taxes—while continuing negotiations on the REPowerEU plan and the Fit for 55 climate package to accelerate the energy transition and reduce dependence on Russian gas. To ensure energy security over winter, the European Commission launched the “European Gas Demand Reduction Plan” in July, urging member states to cut natural gas consumption by at least 15% between 1 August 2022 and 31 March 2023. In September, the Commission unveiled its “Emergency Intervention to Address High Energy Prices,” proposing measures across demand management, pricing, and subsidies—including reducing electricity use during peak hours; capping revenues from low-cost power generation (e.g., renewables, nuclear, and lignite); and imposing windfall taxes on fossil fuel companies. Member states were also permitted to temporarily set regulated electricity prices for SMEs to support businesses struggling under high energy costs. In October, the Commission introduced new proposals to ease the energy crisis, including joint gas procurement, implementing a price cap mechanism on European gas benchmark prices, and coordinating energy supply across member states. In December, after difficult negotiations, EU energy ministers agreed to cap natural gas prices at €180 per megawatt-hour, effective from 15 February this year.

International Oil Prices Remain at High Levels! The 'Butterfly Effect' Emerges!

According to CCTV News, on 27 April local time, reporters learned that global crude oil supply continues to tighten due to stalled U.S.–Iran peace talks and ongoing restrictions on shipping through the Strait of Hormuz—pushing international oil prices to remain at elevated levels. International oil prices continue to fluctuate at high levels, and their ripple effects are gradually permeating into daily life across multiple countries. CNBC reported on 23 April that former U.S. President Donald Trump stated Americans should expect oil prices to rise “for a period of time” as a result of potential military action against Iran—though he did not specify a timeframe. According to the American Automobile Association (AAA), U.S. gasoline prices have surged over 30% since the outbreak of hostilities involving the U.S., Israel, and Iran—surpassing $4 per gallon. Data released by AAA on 23 April showed U.S. gasoline prices reached their highest level since the same period in 2022. Additionally, United Airlines officially announced that, due to persistently rising fuel prices, it would increase baggage fees on domestic U.S. flights and selected international routes. Effective 3 April, passengers flying United Airlines to destinations within the U.S., Mexico, Canada, and Latin America will see a $10 increase for both their first and second checked bags. Eurostat data released on 21 April showed that EU oil prices rose sharply in March 2026: diesel prices increased 19.1% month-on-month, while gasoline prices rose 10.6% month-on-month. That month, EU fuel and lubricant prices rose 12.9% year-on-year. Among the EU’s 27 member states, fuel and lubricant prices rose year-on-year in 25 countries—only Hungary and Slovenia recorded declines. Germany posted the largest annual increase at 19.8%, followed by Romania (19.6%), the Netherlands (18.8%), and Latvia (18.5%). The impact of high oil prices is also spreading further into food and manufacturing sectors. Rising natural gas prices push up fertilizer costs, thereby inflating food prices; meanwhile, many Asian and African countries heavily rely on Gulf crude imports—the resulting energy cost increases ultimately feed into export goods prices, logistics costs, and everyday consumer goods. BBC analysis noted that for every $10 increase in international oil prices, retail gasoline prices typically rise within about two weeks. Geopolitical conflict in the Middle East has driven up European natural gas costs—and consequently pushed up prices for vitamin A and vitamin E. According to Baichuan Yingfu, a commodity information service provider, since the outbreak of Middle Eastern conflict at the end of February, vitamin A prices have risen from ¥59/kg to ¥80/kg—a 35% increase—while vitamin E prices have climbed from ¥57/kg to ¥79/kg, a 38% increase.

EU Warns of Energy Price Crisis, Urges Countries to Curb Demand

15 hours ago

The European Union faces an energy price crisis linked to supply issues from the Iran conflict, prompting Commissioner Dan Jorgensen to urge member states to curb demand and maintain gas storage levels ahead of winter.

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EU Warns of Energy Price Crisis, Urges Countries to Curb Demand

EU Warns of Energy Price Crisis, Urges Countries to Curb Demand

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