The path to a resilient energy system

Europe is now experiencing its second major energy crisis in five years. While the disruption of Russian energy supplies and the closure of French nuclear power stations in 2022 had a direct impact on the EU’s energy supply, the partial blockade of the Strait of Hormuz has had more indirect consequences. The reduced global supply of oil and gas is also driving up prices in Europe and exacerbating our dependence on individual suppliers. In the short term, it is virtually impossible to increase the energy supply. This is because existing production facilities, from wind turbines to oil rigs, are already operating at full capacity. While storage facilities can mitigate short-term shortages, they reveal their limitations during prolonged crises. This leaves us with the demand side.

Many countries have decided to provide financial support to their industries and households so that they can still afford to consume energy even with higher worldwide market prices. However, if global supply were to decline – after all, the blockade of the Strait of Hormuz wiped out 10–20% of the world’s oil and gas supply – then some countries would have to consume less. Those with extensive subsidies could secure a larger share of the scarce supply, while those that were financially weaker would fall behind. Energy exporters would be the primary beneficiaries of this subsidy competition. A better solution would be for a sufficient number of importing countries to agree to reduce their energy imports accordingly during crises. If governments were to forgo energy consumption subsidies, the market would be able to handle most of the reduction in national demand. Government intervention could then be limited to providing additional incentives for energy conservation and accelerating the expansion of supply. This would result in energy prices for all customers rising less sharply without placing a burden on public budgets. An important geopolitical question in this regard is whether such coordination among buyers would require a new international forum.

The Organization of the Petroleum Exporting Countries (OPEC) represents the interests of the world’s major oil and gas-exporting countries, whereas the International Energy Agency (IEA) was established to represent the interests of wealthy buyer nations. Major energy importers such as India, China, and Thailand are not full members of the IEA, while the United States – which has since become a major energy exporter – continues to hold the greatest voting weight within the organization. The IEA has therefore long since ceased to be a true forum for buyers. In the medium term, the key to European energy security and competitiveness lies in consistent electrification, supported by domestic electricity production. The central question is how quickly we can achieve this transition and whether we can overcome national unilateralism in favor of a truly integrated European electricity market. The efficiency potential of such an electricity market would be considerable.

However, the current crisis has once again underscored that policymakers lack reliable data. For example, there were months of uncertainty regarding the EU’s kerosene supply or trends in oil and gas demand. Such a lack of transparency makes it easier for interest groups to argue, unchallenged, for solutions that are detrimental to the general public. At the same time, strategic energy reserves have returned to the political spotlight in 2026. On the one hand, policymakers couldn’t resist the temptation to exploit oil reserves as a tool for price control. In the long term, this could weaken the incentives for traders and consumers to maintain their own stocks as a hedge against risk. On the other hand, there is a new discussion in Germany about the development of strategic natural gas storage facilities. There are good reasons for doing so: the market anticipates lower prices and is therefore not stockpiling on its own; at the same time, Europe’s natural gas supply will be heavily dependent on US gas exports and foreign policy in the years to come. To avoid becoming politically vulnerable in the short term, reserves organized at the European level and outside the market would seem to be a viable option.

The path to Europe’s long-term energy security is clear. The difficult decisions lie in choosing the pace of electrification and efficiently mapping out the route to get there.