EUROPE’S WINTER ENERGY SUPPLY: RESILIENT, BUT AT WHAT COST?

Oil and fuel continue to reach European markets. Gulf producers have found ways to maintain exports despite the continuing risks around the Strait of Hormuz. Saudi Arabia, for example, has made greater use of its East-West pipeline and Red Sea export infrastructure, while other shipments have been redirected through longer and more complicated maritime routes. Yet the system transporting those barrels looks very different from the one that existed before the war.

The challenge of course extends beyond crude oil availability. Disruptions to refining capacity and the movement of petroleum products can create shortages even when crude supplies remain accessible. This is particularly visible in diesel markets, where limited processing flexibility and higher transportation costs continue to put pressure on prices.

Iran presents another interesting part of the picture. Despite sustained American efforts to isolate and economically weaken the country, its oil sector continues to generate revenue. Much of the explanation lies in China.

Beijing has spent years expanding domestic energy production and reducing its external vulnerabilities. Yet China still depends on imports for roughly three-quarters of its oil supply. Iranian crude therefore forms part of a much larger challenge: securing sufficient energy for the world's largest manufacturing economy. China's restrictions on fuel exports illustrate how one country's efforts to protect domestic energy security can tighten supply elsewhere. Decisions made in Beijing can therefore affect diesel markets and consumers thousands of kilometres away, including in Europe.

This illustrates a broader point. In today's energy market, it is no longer enough to ask where energy is consumed. We must also consider where it is produced, processed and transported, and where energy-intensive goods are manufactured. A disruption at one point in this chain can reappear thousands of kilometres away, in the form of higher prices or physical shortages.

Europe is particularly exposed to this reality. Between 1990 and 2025, global energy supply increased by more than 80 per cent, while the EU's share fell from 18.5 to 8.7 per cent. These figures alone cannot explain the transformation of global energy markets. Nevertheless, together with Asia's growing industrial and energy demand, they suggest a gradual shift in the centre of gravity of global energy consumption.

Natural gas presents a similar challenge. Europe enters the winter with considerably lower reserves than in previous years. On 25 October, EU underground gas storage stood at approximately 74.6 per cent, compared with around 83 per cent at the same time last year.

Yet the European Commission sees no immediate generalised threat to security of supply. Since the 2021–22 energy crisis, Europe has expanded its LNG import infrastructure, diversified its suppliers and reduced gas demand. However, greater import capacity does not necessarily mean greater availability. Infrastructure can provide access to alternative suppliers, but it cannot guarantee that sufficient volumes will be available at competitive prices. Europe remains exposed to global LNG competition, particularly during prolonged cold spells when storage withdrawals increase and additional cargoes may be difficult to secure.

Hungary illustrates this dilemma. Its substantial underground gas storage capacity, approximately 77.5 per cent full in late October, provides an important buffer. Yet the country remains heavily dependent on imported oil and natural gas. Even with sufficient physical supplies, Hungary cannot insulate its economy from higher international energy prices, refining costs or transportation expenses.

Secure supply does not necessarily mean affordable supply. The global energy system has proved remarkably resilient. Producers have found alternative routes, buyers have changed suppliers, and governments have drawn on emergency stocks. But inventories cannot be depleted indefinitely, nor can disrupted infrastructure be replaced overnight.

WHY THIS MATTERS

Europe is likely to have sufficient energy to heat its homes this winter. A generalised supply crisis is not the most probable scenario. But resilience should not be mistaken for a return to normality. Energy can be rerouted, LNG cargoes redirected and refineries pushed harder. Yet the costs created by disruption do not disappear. They travel through the same supply chains as the energy itself, until eventually they reach the final consumer. Europe may have enough energy to get through the winter. Whether it can secure that energy at prices that allow its economy to remain competitive is an entirely different question.