Low energy prices conflict with energy security

The industry lobby for lower energy prices is short-sighted because it ignores the geopolitical reality of the EU’s heavy dependence on energy imports. Instead, state aid should focus on improving energy efficiency.

The European Union imports 70% of the energy it consumes, while China imports only 20% and the US is a net exporter (see chart). This determines Europe’s geopolitical position and makes the EU vulnerable to energy blackmail. Energy security should be the first priority. In fact, the EU imports all of its oil and gas, making it highly dependent on foreign suppliers such as Russia, Qatar and the US. Domestic (EU) renewables cover at least part of current energy consumption; 20% in 2023.

The high import dependency can only be reduced in two ways: by increasing domestic production and by reducing energy consumption. Exploiting all the proven oil and gas reserves in the 27 Member States can cover about one year of current energy consumption. Renewables offer better prospects for domestic production. As early as 2030, a third of current energy consumption can be supplied by renewables each year. This could rise to two-thirds by 2050, following the European Commission’s energy scenarios. Increasing renewable energy production in the EU is therefore one key to improving energy security.

The second way is to reduce energy consumption. According to the EU scenarios, a reduction of a quarter by 2050 is possible. This can be achieved by consuming less energy services – such as lighting – using less energy-intensive products – such as steel – and improving energy efficiency. Shifting to electric mobility and heat pumps for buildings, will reduce final energy consumption by around one third, because of the high energy efficiency of these technologies.

Reducing energy consumption requires high energy prices in a market economy. High prices are the only way to improve energy efficiency when regulation is impossible or too bureaucratic. Pricing also discourages growth in the use of energy services such as lighting, rain showers and patio heaters. The industry lobby for lower energy prices is therefore short-sighted and negative for the EU’s energy security.

The counter-argument that low energy prices are necessary for industrial competitiveness is not valid. Since Europe lacks natural resources, we should compete on higher efficiency of our production processes. This must be the focus of efforts to strengthen the competitiveness of EU industry, and this will reduce the cost of European energy-intensive products. Together with CBAM – import tariffs on foreign products with a high carbon content – this will result in a fair competitive position for European industry, while improving energy security. Low oil and gas prices have the opposite effect.

Fewer energy imports could save the EU billions of euros. These should be used to support the energy efficiency of our industries and to increase the domestic production of renewables. The net import bill is €340 billion in 2024. Together with imports of raw materials (30 billion), this is the only negative impact on our trade balance. Effective government support requires a fundamental make-over of past practices, as argued in T&E’s report State Aid 2.0 – Lean, clean, European. A quick first step is to impose a WTO-compliant tariff of 1.7% on all oil imports. This would raise 3 billion a year, which should be used to improve the energy efficiency of our industries.

May 2025