Brussels Edition: Taming energy prices

EU member states are scrambling for ways to rein in costs stoked by the Iran war.

Read in browser

Welcome to the Brussels Edition. I'm Suzanne Lynch, Bloomberg's Brussels bureau chief, bringing you the latest from the EU each weekday. Make sure you're signed up. Group of Seven leaders are holding talks this afternoon to discuss the impact of the Iran war on energy supplies as governments across the EU seek ways of limiting the short-term fallout for their constituents. In an effort to contain the spike in oil prices triggered by the conflict, the International Energy Agency (IEA) has proposed its members release emergency oil reserves of as many as 400 million barrels, which would be the largest such move in the organization's history. The EU, whose top officials will represent the bloc in the G-7 talks, will convene its oil coordination group tomorrow. Earlier today, European Commission President Ursula von der Leyen said the EU executive is exploring measures to try to weaken the influence of natural gas on power costs across the region – including a possible cap on the price. "It is crucial that we reduce the cost impact, when gas sets the electricity price," von der Leyen said in a speech at the European Parliament in Strasbourg. "We are preparing different options: better use of Purchase Power Agreements and contracts for difference; state aid measures; exploring subsidizing or capping the gas price," she added. The EU created an emergency gas-price cap mechanism during the energy crisis that followed Russia's full-scale invasion of Ukraine four years ago, though it was never deployed. Von der Leyen also defended the EU's Emissions Trading System (ETS), the cornerstone of the bloc's green agenda, against criticism from business groups. "Without ETS we would now consume 100 billion cubic meters more gas, again making us more vulnerable, more dependent and weaker," von der Leyen said. "So we need ETS. But we need to modernize it." More immediate measures being enacted across the region to stem rising prices include a profit-margin cap on fuel and groceries for the next three months in Greece, and preventing gas stations from increasing fuel prices more than once per day in Germany. The Latest French Finance Minister Roland Lescure said today that the government in Paris is sticking to its growth forecast of 1% for this year even if the surge in energy prices following the outbreak of the Iran war will likely weigh on the economy. Italian Prime Minister Giorgia Meloni said her country will not participate in the US-Israeli attacks on Iran, and is instead seeking to help with a diplomatic resolution. Rheinmetall predicted that sales this year will reach €14 billion ($16.3 billion) to €14.5 billion, falling short of analyst expectations at a critical time for the German defense contractor as Europe's military spending surges. Ukraine may face depleted air defenses as the US-led war with Iran burns through global stockpiles of Patriot missiles, the most valuable weapon Kyiv has in its arsenal against Russian attacks. Deutsche Lufthansa is facing a two-day pilot walkout starting tomorrow, threatening to ground hundreds of flights at a time when the airline is already grappling with fuel-price volatility and geopolitical disruption linked to the war in Iran. Seen and Heard on Bloomberg The ECB should "just sit tight for now and make reassuring noises" despite the rise in energy costs resulting from the Iran war, according to Janet Henry, global chief economist at HSBC. "This is the difficulty with oil prices if inflation expectations are not anchored," Henry told Bloomberg TV. "Now, they absolutely are in the case of the eurozone, because if oil prices go up and gas prices go up and all these other costs go up, you're spending more on those goods, that should squeeze your spending on other areas and other areas of demand and other prices should fall." Chart of the Day ECB Governing Council member Peter Kazimir suggested the Middle East conflict and its impact on inflation could nonetheless force the ECB to raise interest rates sooner than anticipated. "For the time being, we need to stay calm," even though "I'd say a reaction by the ECB is potentially closer than many people think," Kazimir said yesterday in an interview in Frankfurt. "I don't want to speculate about April or June. But we will be ready to act if needed." Coming up G-7 leaders call on economic consequences of war in Middle East this afternoon European Parliament press conference this afternoon on priorities for 2027 budget EU's Oil Coordination Group meets tomorrow Germany's Merz holds talks tomorrow evening in northern Norway with his Norwegian counterpart, Jonas Gahr Støre Final Thought Hungarian Prime Minister Viktor Orban. Photographer: Simon Wohlfahrt/Bloomberg Hungary's ruling party narrowed the gap slightly to the opposition Tisza party in a new poll less than five weeks before the national election, though Tisza still holds a 14-point advantage over Prime Minister Viktor Orban's Fidesz. The first independent survey since the start of the Iran war shows the gap would be enough to hand Tisza a comfortable parliamentary majority in the April 12 vote. Like the Brussels Edition? Don't keep it to yourself. Colleagues and friends can sign up here. How are we doing? We want to hear what you think about this newsletter. Let our Brussels bureau chief know. We're improving your newsletter experience and we'd love your feedback. If something looks off, help us fine-tune your experience by reporting it here. Follow us You received this message because you are subscribed to Bloomberg's Brussels Edition newsletter. If a friend forwarded you this message, sign up here to get it in your inbox. Unsubscribe Bloomberg.com Contact Us Bloomberg L.P. 731 Lexington Avenue New York, NY 10022 |