Europe Prepares for Second Energy Crisis Amid Gas Storage Coordination Plans

European Commission to Outline Plans for Electricity Tax Cuts and Gas Storage Coordination

The European Commission is set to unveil plans on Wednesday aimed at reducing electricity taxes and coordinating the refilling of gas storage facilities across member countries. These measures are a response to the energy fallout from the ongoing conflict in Iran.

Draft proposals indicate that the EU will not resort to major market interventions, such as capping gas prices or taxing windfall profits from energy companies, which were implemented during Russia’s gas supply disruption and price surge in 2022.

Instead, the Commission plans to modify tax rules to favor electricity over oil and gas, making it easier for governments to reduce industries’ electricity taxes to zero. The EU will also coordinate countries’ efforts to refill gas storage facilities and provide guidance on managing potential jet fuel shortages.

Europe’s heavy reliance on imported oil and gas has left it vulnerable to rising prices since the Strait of Hormuz was effectively closed and Iran began attacking energy infrastructure in the Middle East. Europe’s benchmark gas price is currently about a third higher than before the US-Israeli war with Iran began on February 28.

However, the EU’s largest oil and gas suppliers – the US and Norway – are not located in the Middle East, and the crisis has yet to trigger fuel shortages in Europe. Airlines have warned that jet fuel shortages could emerge within weeks.

EU officials told Reuters that the bloc’s relatively restrained response is due to national governments controlling many crisis-management levers, including subsidies and cutting national taxes and levies. The Commission’s plans outline non-binding ways for governments to provide immediate relief, such as encouraging businesses to avoid air travel where possible.

Some officials said the response also reflects an assessment that the war-driven energy shock could last for months, making it prudent to hold back more extreme measures for now.