Gas from Azerbaijan + Expansion of charg • Table.Briefings

Dear reader,

It is and remains the defining question these days: Will gas from Russia soon again flow to Europe or not? It is true that more gas will soon be coming from Azerbaijan. Commission President Ursula von der Leyen and Azerbaijan’s President Ilham Aliyev have now signed a memorandum of understanding on this. But this is not an instant solution, and especially not a green one. Manuel Berkel has summarized the current situation.

Turning away from fossil fuels, toward energy from the socket, many sockets – this is what the transport transition also needs. To this end, EU countries must build the necessary charging infrastructure as quickly as possible, but the efforts for the Alternative Fuel Infrastructure Directive (AFIR) are not ambitious enough for some. Lukas Scheid has the details.

The EU Commission also needs to rework the planned Single Market Emergency Instrument. This new tool is intended to improve cooperation between EU countries in times of crisis. Read more in the News.

The combustion engine still dominates Germany’s roads. A fuel rebate was recently introduced to ease the burden. Shortly before its introduction, however, it seemed as if prices at the gas pumps skyrocketed. Rip-off? Christian Küchen, Managing Director of the fuels and energy trade association en2x, explains if there is any truth to this in today’s Opinion.

Your
Lisa-Martina Klein

Azerbaijan to double gas imports to EU

By

Manuel Berkel

Plans for more gas from the Caspian Sea are taking shape. Currently, 8.1 billion cubic meters (bcm) flow annually from Azerbaijan to the EU; from 2027, this figure is to rise to 20 bcm. A corresponding memorandum of understanding was signed yesterday in Baku by EU Commission President Ursula von der Leyen and Azerbaijan’s President Ilham Aliyev. Supplies via the southern gas corridor are to be increased to 12 bcm as early as 2023.

Azerbaijan is a key partner in moving away from fossil fuels from Russia, von der Leyen said, praising the country’s reliability. However, authoritarian Azerbaijan is not without controversy as a supplier and also maintains close ties with Russia.

In addition to gas imports, the memorandum of understanding also envisages closer cooperation on renewable energy. In the Caspian Sea alone, there is a potential for wind power of 157 gigawatts (GW), Aliyev said. In previous years, European companies have repeatedly explored the feasibility of importing power from regions outside the EU or developing trade routes for green hydrogen. In Baku, Aliyev now surprised with a different variant.

Renewables for Azerbaijan, natural gas for the EU

“Investing in renewable energy to save more natural gas for export,” said the President of Azerbaijan. So clean energy for the Caucasus and more fossil fuels for Europe? Aliyev did not go into details ahead of the press. The production of green hydrogen also appears in the memorandum, although only as a distant goal.

Somewhat more concrete are plans to transport green electricity directly to the EU. Cables running through the Black Sea and a land connection via the autonomous Azerbaijani Republic of Nakhichevan, which has a narrow border with Turkey, are mentioned as possible corridors.

With the current Ten-Year Network Development Plan (TYNDP 2022), ENTSO-E already wants to study the need for a cable between Romania and Azerbaijan’s neighbor Georgia through the Black Sea. The two submarine cables, with a combined capacity of one gigawatt, could be operational by 2029, according to the plan. In the long term, the EU could well use additional green electricity from the Caucasus for its own coal phase-out and the transition from gas-fired heating systems to electricity.

Turbine affair disrupts EU schedule

Within days or weeks, however, the Union will have to find answers to Gazprom’s endless maneuvers. As the Russian newspaper Kommersant reported yesterday, the disputed Siemens gas turbine was flown from Canada to Germany on Sunday.

The turbine was taken from a compressor station on the Nord Stream 1 pipeline, where maintenance work is currently underway and is expected to be completed on July 21. Gazprom claims the turbine is “of vital importance” to the pipeline’s operation – something the German Ministry for Economic Affairs denies. According to the Kommersant report, however, Russia’s stories surrounding the turbine have the potential to disrupt the EU’s schedule.

On July 26, the energy ministers in the Council plan to agree on a joint response to the possible halt of Russian gas supplies. Now, however, according to the paper, the turbine is not expected to arrive in Russia until around July 24, and its installation will take another three to four days.

It could be early August before gas actually starts flowing through Nord Stream again – decisive days after the Energy Council in Brussels. For weeks now, experts have been warning that Russia wants to further weaken the EU community by using ever new pretexts and smokescreens to delay decisive steps by the EU to save gas.

Hungary fully relies on Turkstream

Another step toward permanently weakening Nord Stream 1 could happen further south on the continent. Hungary is in talks with Russia to divert all gas supplies to the Turkstream pipeline, Foreign Minister Peter Szijjarto announced Monday. Hungary receives gas via Serbia from Turkstream. Szijjarto said the move was necessary because supplies from the west via Austria were becoming more uncertain.

Sanctions expert Janis Kluge of the German Institute for International and Security Affairs sees this as a calculated move: “This would allow cutting off Ukrainian transit and NordStream1 without abandoning Orban.”

In contrast, experts already expected another announcement by Gazprom on Monday. The Russian state-owned company explained the failure to deliver gas to Uniper as force majeure. Uniper had received a letter from Gazprom Export, a spokesperson for the energy supplier said.

Gazprom speaks of ‘force majeure’

In the letter, Gazprom Export had retroactively claimed “force majeure” for past and current gas shortages. However, according to the spokesman, Uniper does not consider this valid and has formally rejected this claim.

As Reuters previously reported without naming the company, Gazprom is said to have declared force majeure retroactive to June 14. The notice is intended to absolve the company of compensation claims. Gazprom first declared it would cut supplies through Nord Stream 1 on June 14.

Against this background, an appeal by the International Energy Agency (IEA) on Monday morning must be seen as a final warning. IEA Director Fatih Birol called on the EU to take five immediate measures – from auctions for industrial gas waivers to joint emergency plans. With dpa, rtr

Charging infrastructure expansion: one step away from agreement

By

Lukas Knigge

Now that the EU Parliament and the EU Ministers of the Environment have agreed to phase out the internal combustion engine by 2035, representatives of the automotive industry are pressing all the harder for the rapid expansion of the charging infrastructure. The framework conditions and clear targets that create the conditions for the ramp-up of electromobility are lacking, explains VDA President Hildegard Müller.

The level of ambition of the Commission’s proposal for the so-called Alternative Fuel Infrastructure Directive (AFIR) is not sufficient, according to the European Automobile Manufacturers Association (ACEA). “While some countries are powering ahead when it comes to infrastructure rollout, the majority are lagging behind,” says ACEA Director General Eric-Mark Huitema. “The stark disparities demonstrate the need for strong AFIR targets that are harmonized across all EU member states.”

AFIR parliamentary rapporteur Ismail Ertug (SPD) has been trying to raise the level of ambition since taking over the dossier. But he has found himself repeatedly held back in negotiations in the past. While other parts of the Fit for 55 package have already reached the trilogue, the AFIR is still awaiting a vote in Parliament. The member states have already set their general direction in the Council of Transport Ministers.

Criticism of political advisors

Most recently, Ertug openly criticized the political advisors of the groups, canceled the technical meetings of these same advisors, and raised the negotiations to the exclusive concern of the rapporteurs and shadow rapporteurs in order to speed up the process. Apparently with success. At the last shadow meeting before the summer break at the end of last week, many of the questions that were still unresolved were clarified.

The mandatory expansion volume for member states per registered EV and plug-in hybrids has been defined. The gradual requirements depending on existing fleets of both vehicle classes are in line with the proposals in the rapporteur’s first draft. Ertug now says he has a majority for these.

However, due to pressure from some member states, flexibilities were granted for so-called “sparsely populated areas”. “In order for public money to be used as sparingly and purposefully as possible, there needs to be limited flexibility, coupled to the actual traffic flow, for infrastructure targets,” says EPP shadow rapporteur Jens Gieseke.

13 such sparsely populated regions are clearly defined by the EU. They are mainly located in northern Sweden, northern Finland and central Spain. These regions were defined using data from the population registration offices. For the expansion of the charging infrastructure, however, attention was also paid to the traffic density of these areas. This means that no exceptions are made for sparsely populated regions with high traffic volumes (e.g., transit traffic).

Ismail Ertug also had to compromise on the minimum coverage of charging infrastructure. A minimum requirement for infrastructure expansion is intended to prevent countries from circumventing their expansion obligations by not registering EVs or hybrids. By the end of 2027, all countries are to provide enough charging stations to theoretically supply an EV share of three percent of their respective passenger car fleets. By the end of 2030, the target is five percent. Ertug originally wanted higher targets.

The nine so-called “outermost regions”, also defined by the EU, are completely exempt. These include remote island regions such as the Azores, Madeira and the Canary Islands and French Guiana.

LNG expansion for trucks continues for the time being

Ertug had to make another concession on heavy-duty road transport. In his draft report, he called for a halt to the expansion of LNG for trucks, as this posed risks for stranded assets and lock-in effects of fossil technologies. Jens Gieseke, on the other hand, called for the expansion of LNG infrastructure, saying liquefied natural gas was needed as a temporary solution to become independent of Russian oil. The compromise lies in the Commission’s proposal, which does not specify any explicit LNG expansion targets, but merely consolidates the existing expansion targets valid until 2025. Accordingly, there must be an LNG refilling station every 400 kilometers in the TEN-T core network.

Despite the compromises, the EPP shadow rapporteur believes that after the summer break, when the negotiations continue, there will still be “a few thick planks to be drilled”. The discussion on the specific regulations for private parking spaces, for which the rapporteur wants to introduce a charging station obligation, is still open, says Gieseke. From the EPP’s perspective, however, the AFIR is the wrong place for this. Such regulations would instead have to be regulated via the Energy Performance of Buildings Directive (EPBD).

This concerns private parking lots with more than 30 spaces, which would mainly affect supermarkets. To clarify this issue, Ertug says he involved Parliament’s legal advisers. They have confirmed that supermarkets are excluded from the Building Efficiency Directive. Ertug is therefore convinced that the AFIR is the right place for such a regulation – even if it regulates inside private property. However, Ertug stresses, charging stations in private parking lots could count toward a member state’s overall expansion goals.

Definition of alternative fuels

Another open question is how alternative fuels will be defined in the directive. Various proposals from the different parliamentary groups envisage a multitude of different definitions. To avoid the debate from the very beginning, the rapporteur would rather refer to the Renewable Energy Directive (RED), which is being negotiated in the Environment Committee. Here, he believes that the AFIR is not the right place to clarify definitional matters.

One final shadow meeting is to be held on September 7. There, Ertug wants to clear up all the outstanding issues so that he can then proceed to the vote in the Transport Committee. In October, the parliament will then decide on the report, at least according to the current timetable.

Petersberg Climate Dialogue: Timmermans insists on mitigation

Financial support for loss and damage resulting from climate change, as well as climate adaptation, are high on the list of priorities at this year’s Petersberg Climate Dialogue in Berlin, especially for countries in the global South. On Monday, Frans Timmermans nevertheless pointed out the need to reduce emissions – also known as mitigation.

Adaptation and loss and damage won’t help if you don’t get better at mitigation, the EU Commission’s Executive Vice President said in his statement. “There is no level of adaptation and loss and damage that will be able to address the issue if we do not do better on mitigation.”

Molwyn Joseph, Minister of Environment for the island nation of Antigua and Barbuda, countered that mitigation, adaptation, and loss and damage are not competing principles. There were funding opportunities for all three, he said. He, therefore, called for loss and damage to be placed on the agenda of this year’s global climate conference (COP27) in Sharm El-Sheikh.

In addition, as a representative of the Alliance of Small Island States, he reminded who is primarily responsible for climate change. “The industrialized countries that are causing the emissions need to step up their efforts,” Joseph said, pointing out that small island states contribute the least to climate change but are already clearly feeling its effects.

German government announces climate protection umbrella

The German government now wants to live up to this responsibility and presented a concept for a protective umbrella against risks and damage in developing countries on Monday. The proposal is aimed at regulations for early warning systems in particularly vulnerable countries, precautionary plans and rapid financing systems in the event of damage events, as the Development Ministry announced on Monday.

“We need to acknowledge that there is climate damage and that the most vulnerable countries, in particular, need our solidarity to deal with it. Here, we want to build bridges for the next World Climate Conference in Egypt with concrete solutions to problems,” explained State Secretary Jochen Flasbarth.

The extent to which Germany alone suffers from the consequences of climate change has been examined in a study commissioned by the BMWK and BMUV. Since 2000, climate change is said to have caused damage amounting to €6.6 billion per year, according to the Prognos study, which was presented on Monday. In total, the costs have been at least around €145 billion. This is reportedly only a portion of the damage that has occurred. The actual amount of damage is even higher than the sum mentioned, as some damage, such as the loss of biodiversity, cannot be quantified. luk with dpa

EU report: majority of Europe threatened by drought

According to a report by the EU Commission’s Joint Research Center, a large part of the European Union’s territory is threatened by drought. At the end of June, 46 percent of land was at a drought warning level two, and 11 percent was at the highest of three warning levels, according to data released Monday. Severe drought, which has affected several regions of Europe since the beginning of the year, continues to spread and worsen, the report said. This is due, for example, to a lack of precipitation combined with heat waves.

Climate change is increasing the risk of severe droughts and forest fires around the world, stressed Marija Gabriel, European Commissioner for Research. “With this report, we have a better understanding of the situation in order to protect our forests, our crops and our waters,” Gabriel said.

Water and heat stress caused crop yields to decline further. France, Romania, Spain, Portugal and Italy are likely to struggle with this decline in crop yields, according to data from the EU Commission. Germany, Poland, Hungary, Slovenia and Croatia are also likely to be affected to some extent.

The Commission also declared on Monday that it would mobilize further aid through the Civil Protection Mechanism to fight severe forest fires across Europe. Firefighting aircraft from the rescEU fleet have reportedly been deployed to Slovenia and France in recent days. In addition, the Copernicus satellite service has been activated “to assist the French authorities in monitoring the forest fires in the southwest of the country,” the Brussels-based agency said. dpa/luk

Single market: setback for planned crisis instrument

According to information obtained by Europe.Table, the EU Commission needs to rework the planned Single Market Emergency Instrument. According to EU sources, the Commission’s internal Regulatory Scrutiny Board has identified flaws in the impact assessment. Those responsible under Commissioner for the Internal Market Thierry Breton must now work at full speed to improve the proposal to be able to present it as planned in Ursula von der Leyen’s State of the Union address on September 13.

The authority stated that the Regulatory Scrutiny Board’s (RSB) criticism primarily concerns governance structure. Specifically, the issue is which phase of a crisis could be declared under what circumstances. This determines which instruments can be activated. The Commission did not comment officially on this matter.

This crisis instrument is intended to ensure that the EU is better prepared for events such as the Covid pandemic or the Russian attack on Ukraine. In the first wave of the pandemic, governments closed their borders, sometimes in an uncoordinated manner, and there was a shortage of important goods such as protective masks. The Commission wants to use the new tool to improve information flows and ensure critical goods and services remain available.

The proposal is expected to be based on two pillars. The first pillar of crisis preparation is likely to include monitoring of supply chains for goods classified as critical, including transparency obligations for companies, as well as requirements for the stockpiling of certain raw materials, for example.

The second pillar is aimed at responding to acute crises. The measures under discussion include more leeway for the joint procurement of goods by member states. In the event of a crisis, companies could be subject to new obligations, such as export controls or the prioritization of orders for urgently needed products.

Nine member states have warned in a letter that the crisis instrument should not intervene unnecessarily deeply in the economy. The EPP Group’s spokesman on internal market policy, Andreas Schwab, warned that the Commission must ensure that the member states leave the borders open even in the event of a crisis – after all, the single market would be a source of prosperity. In addition, he said, it should be ensured that companies “have sufficient stocks of critical products in Europe”. Where they produce them, on the other hand, should be left up to the companies. tho

Council lifts trade barriers for agricultural imports from Moldova

EU agriculture and trade ministers decided on Monday to temporarily liberalize trade in seven agricultural products from Moldova. Tomatoes, garlic, table grapes, apples, cherries, plums and grape juice were still subject to restrictions. Once the new regulation enters into force, Moldova will be able to export at least twice the amount of these products to the European Union duty-free for one year.

“We cannot ignore the impact of the Russian war of aggression against Ukraine on Moldova,” warned Jozef Síkela, Czech Minister of Industry and Trade. With these exceptional measures, the EU is deepening its trade relations with Moldova and is supporting the stabilization of Moldova’s economy. luk

EU steps up fight against disinformation

The EU fears being put on the defensive by disinformation and manipulation from Russia. The foreign ministers now want to take countermeasures – with a new toolbox, they decided on Monday at the Foreign Affairs Council in Brussels. The EU Commission and Josep Borrell, the EU’s High Representative of the Union for Foreign Affairs, were tasked with drafting this “hybrid toolbox” to counter threats, which are summarized under the acronym FIMI (“Foreign Information Manipulation and Interference”).

The background is the war in Ukraine and the dispute over Ukrainian grain exports. The EU accuses Russia of deliberately blocking exports and thus triggering a food crisis in the Middle East, Africa and other regions of the world. Russia rejects this claim; the African Union has also expressed reservations about the European narrative. Senegal’s President and AU head Macky Sall said EU sanctions were also causing supply problems.

This controversy was an example of the “war of narratives,” Borrell said. The EU is at risk of losing this war, he said, and now wants to counter it. As another example, he cited the claim that the oil embargo imposed by the EU on Russia has driven up oil prices. Borrell stressed that the opposite was the case at the meeting of foreign ministers. However, he left open the question of how the EU intends to counter this.

In the Outcome of Proceedings, the Foreign Affairs Council mentioned a number of tools that should be used more systematically than in the past. These include improving awareness of the situation through the Single Intelligence Analysis Capacity, as well as resilience and capacity building, regulatory and diplomatic measures. However, the main responsibility in the fight against disinformation lies with the EU states, the paper said. ebo

Circular economy: potential for trade between the EU and China

The EU is seeking greater cooperation in international trade toward its goal of a circular economy. In bilateral trade agreements, which regulate around 40 percent of the EU’s total trade volume, the circular economy has so far rarely been explicitly mentioned. However, there is great potential with trading partners such as China, especially for plastics and textiles. This is according to the Institute for European Environmental Policy (IEEP) in a policy briefing published yesterday.

In the report, the institute assesses how the EU could support the transition to and adoption of the global circular economy through its trade frameworks and international cooperation. Based on case studies, including trade relations with China, the IEEP drafts recommendations for policy action.

To increase the use of trade agreements as a tool for cooperation on the circular economy, IEEP recommends “strengthening the Trade and Sustainable Development (TSD) Chapters for circularity, by including more explicit commitments to cooperation on circularity and securing the Paris Agreement as essential element of all trade agreements going forward.” The EU should also increasingly share and harmonize “knowledge regarding circular economy legislation, data collection methods, monitoring frameworks and begin to close data gaps on the flow of material and energy resources“.

International standards necessary

The EU should also promote multilateral dialogues and cooperation on the circular economy. For example, a common definition for the circular economy could be developed within the Trade and Environmental Sustainability Structured Discussions (TESSD) of the World Trade Organization (WTO). Standards could be developed and harmonized internationally through the International Organization for Standardization (ISO) or the World Customs Organization (WCO).

Furthermore, the EU should embed principles of the circular economy in development cooperation programs such as “Aid for Trade”. The gap between industrialized and developing countries must be prevented from widening with regard to the distribution of benefits from the circular economy.

The EU and China have not yet signed a bilateral trade agreement. Trade is therefore conducted on WTO conditions. For the development of a circular economy and sustainable trade, according to the IEEP report, China’s and the EU’s strategies to promote sustainable plastics and textiles, in particular, are a solid foundation.

Similar targets for plastics and textiles

There are legislative similarities regarding plastics: These include the ban on some plastic products (plastic bags, disposable tableware and cutlery, microplastics in personal care products), the promotion of alternatives to plastics, and the improvement of the infrastructure for plastic recycling. Chinese plastic products have so far not been required to contain a certain proportion of recycled plastic, while the EU continues to increase the proportion of recycled plastic.

Regarding textiles, both China and the EU are also planning policies to address environmental impacts and the circular economy. Both also aim to increase the recycling rate for textiles, minimize the final disposal (in landfills, for example) of textile waste, and counter the trend toward “fast fashion”. In addition, the EU’s intention to restrict textile waste exports and China’s ban on textile waste imports complement each other. This would offer potential for a greater circularity in the global textile economy.

The EU has set the goal of a circular economy in its Circular Economy Action Plan (CEAP). In March, the EU Commission presented a first package of measures, and has announced a second for the end of November. leo

EU ambassador designate shocks with Taiwan statement

An interview of the future EU ambassador to China has generated attention over a statement on Taiwan. Speaking to the Catalan daily La Vanguardia, Jorge Toledo Albiñana said “the EU does not defend the independence of Taiwan, but the peaceful reunification“.

Afterward, Toledo swung back to the old familiar line: “We believe that there should be only one China, but in the event of a military invasion we have made it very clear that the EU, with the US and its allies, will impose similar or even greater measures than those we have now taken against Russia,” he added. The One-China-policy is the common position of Brussels regarding the status of Taipei. But the fact that Toledo spoke of a “peaceful reunification” was criticized on social media.

Toledo also commented on other China policy issues in the interview. Decoupling exists, “but not by the will of China”. For example, the West has recognized the need to rethink its production. “The pandemic exposed the vulnerability of value chains,” Toledo said. China’s exports to Europe, however, continue to grow, the diplomat said.

The EU ambassador-designate to China also spoke on national issues, saying, “China has lifted nearly 800 million people out of poverty. This is a free market success, not communism.” However, as in any country that develops very quickly, there would come a time when it cannot continue to grow as fast. “The demographic pressure on the economy is enormous,” Toledo said.

Until recently, Toledo was Spain’s ambassador to Japan. According to the report, he is expected to take up his post as EU ambassador in September, succeeding France’s Nicolas Chapuis. ari

Report: Xi invites EU heads of government

According to a report, European leaders have been invited to meet Chinese President Xi Jinping in Beijing in November. This was reported by the South China Morning Post on Monday. According to SCMP, the invitation is said to have been sent to German Chancellor Olaf Scholz, French President Emmanuel Macron, Italian Prime Minister Mario Draghi, and Spanish Prime Minister Pedro Sánchez. It is now up to the Europeans to decide whether to accept China’s invitation, SCMP said.

A meeting in November would be immediately after the 20th Party Congress in October. The fact that Xi is inviting European leaders to China in November indirectly confirms what basically all observers assume: namely, that Xi Jinping will get a third term as president. The meeting would mark the return of face-to-face diplomacy between Europe and China – after almost three years of strict zero-COVID policies that have made face-to-face exchanges between the leaders of Europe and China impossible. rad

How the fuel discount became a bone of contention

By Christian Küchen

Christian Küchen is Chief Executive Officer of the fuels and energy business association en2x.

For a month, from mid-May to mid-June, the discussion about the so-called fuel rebate kept large parts of Germany on tenterhooks. What had happened?

Here is a brief recap: With the end of many Covid lockdowns and then again with the start of the Ukraine war, prices for gasoline and diesel had risen significantly around the world and thus also in Germany. As a result, taxes on fuel were lowered in many countries – first in Poland, followed by Italy, France, the UK, the Czech Republic and finally Germany: The German parliament passed a fuel rebate on gasoline and diesel for three months from June to the end of August.

EU embargo against Russia

Anticipation was high, but in mid-May of all times, a perfect storm hit the international mineral oil markets. The reasons ranged from the EU’s embargo decision against Russia to a sharp rise in spring gasoline demand in the USA. At the same time, refinery outages in North America and Europe – due to maintenance, unforeseen plant malfunctions and logistics bottlenecks – led to lower fuel production.

As a result, product prices rose worldwide and, with them, gas station prices. In the USA, motorists paid more than $5 per gallon for the first time. In Germany, the price of a liter of Super E10 rose by 16 cents in May, while diesel increased by 6 cents within a week at the end of the month.

Fuel tourism from Denmark and Benelux

Many observers thought that this development was unique to Germany and suspected a connection with the fuel rebate. However, a glance at neighboring EU countries would have shown that the price increase was not a German phenomenon. The massive increase in fuel tourism from Denmark, Belgium, Luxembourg and the Netherlands to Germany at the beginning of June could also have changed this perception, but mainly received increased attention in the border regions.

The fuel rebate was thus well received by customers – and it came at just the right time, when fuel prices were on the rise around the world. Instead, it was not perceived as a relief in many cases. There was a suspicion that the industry was keeping part of the energy tax cut.

Refineries closed in many countries

What was the cause of this perception? First and foremost, by comparing gas station prices with crude oil prices – which have not risen as sharply – and concluding that the fuel discount does not fully benefit the customer. But in fact, consumer prices follow world market prices for gasoline and diesel – and not crude oil prices. In the past, this important difference was often overlooked because sufficient refinery capacity was available and enough products could always be made from crude oil.

This situation changed fundamentally at the latest with the outbreak of the Ukraine war: It is not crude oil on the world market that is in short supply, but gasoline and diesel at the gas pump. One reason: During the Covid pandemic, refineries had been closed in many countries. When demand picked up again, these capacities were missing. As a result, fuel prices decoupled from the oil price. This decoupling was most recently accelerated by the EU import embargo against Russia.

It’s not just about crude oil: All EU member states combined have imported an average of around 20 million tons of diesel per year from Russia in recent years. So the fuel produced in refineries there also has to be replaced – further exacerbating the product shortage.

Green hydrogen needs investment

It is indisputable that many of our fuel refineries are earning more money with higher product prices than the long-term average, despite the significant increase in energy costs. However, it is equally indisputable that these refineries have incurred losses, in some cases heavy ones, in recent years due to the Covid-induced slump in demand. This has to be kept in mind when discussing “excess profits“.

Refineries are now facing investments in the billions to switch from fossil energy to carbon neutrality. They are predestined to enter large-scale green hydrogen production. However, such risky investments are not becoming more likely when there is a perceived risk that future profits may be siphoned off, sanctioning market-based outcomes. At the end of August, the fuel rebate in Germany will expire. It is foreseeable that there will once again be considerable discussion about local gasoline and diesel prices. But even then, the same applies in Germany as elsewhere: Consumer prices depend fundamentally on the global market prices.

EUROPE.TABLE EDITORS

Till
Hoppe

Charlotte
Wirth

Falk
Steiner

Timo
Landenberger

Corinna
Visser

Lukas
Knigge

Eric
Bonse

Sarah
Schaefer

Manuel
Berkel

Lisa-Martina
Klein

Markus
Grabitz

Stephan
Israel

Claire
Stam

Dear reader,

It is and remains the defining question these days: Will gas from Russia soon again flow to Europe or not? It is true that more gas will soon be coming from Azerbaijan. Commission President Ursula von der Leyen and Azerbaijan’s President Ilham Aliyev have now signed a memorandum of understanding on this. But this is not an instant solution, and especially not a green one. Manuel Berkel has summarized the current situation.

Turning away from fossil fuels, toward energy from the socket, many sockets – this is what the transport transition also needs. To this end, EU countries must build the necessary charging infrastructure as quickly as possible, but the efforts for the Alternative Fuel Infrastructure Directive (AFIR) are not ambitious enough for some. Lukas Scheid has the details.

The EU Commission also needs to rework the planned Single Market Emergency Instrument. This new tool is intended to improve cooperation between EU countries in times of crisis. Read more in the News.

The combustion engine still dominates Germany’s roads. A fuel rebate was recently introduced to ease the burden. Shortly before its introduction, however, it seemed as if prices at the gas pumps skyrocketed. Rip-off? Christian Küchen, Managing Director of the fuels and energy trade association en2x, explains if there is any truth to this in today’s Opinion.

Your
Lisa-Martina Klein

Azerbaijan to double gas imports to EU

By

Manuel Berkel

Plans for more gas from the Caspian Sea are taking shape. Currently, 8.1 billion cubic meters (bcm) flow annually from Azerbaijan to the EU; from 2027, this figure is to rise to 20 bcm. A corresponding memorandum of understanding was signed yesterday in Baku by EU Commission President Ursula von der Leyen and Azerbaijan’s President Ilham Aliyev. Supplies via the southern gas corridor are to be increased to 12 bcm as early as 2023.

Azerbaijan is a key partner in moving away from fossil fuels from Russia, von der Leyen said, praising the country’s reliability. However, authoritarian Azerbaijan is not without controversy as a supplier and also maintains close ties with Russia.

In addition to gas imports, the memorandum of understanding also envisages closer cooperation on renewable energy. In the Caspian Sea alone, there is a potential for wind power of 157 gigawatts (GW), Aliyev said. In previous years, European companies have repeatedly explored the feasibility of importing power from regions outside the EU or developing trade routes for green hydrogen. In Baku, Aliyev now surprised with a different variant.

Renewables for Azerbaijan, natural gas for the EU

“Investing in renewable energy to save more natural gas for export,” said the President of Azerbaijan. So clean energy for the Caucasus and more fossil fuels for Europe? Aliyev did not go into details ahead of the press. The production of green hydrogen also appears in the memorandum, although only as a distant goal.

Somewhat more concrete are plans to transport green electricity directly to the EU. Cables running through the Black Sea and a land connection via the autonomous Azerbaijani Republic of Nakhichevan, which has a narrow border with Turkey, are mentioned as possible corridors.

With the current Ten-Year Network Development Plan (TYNDP 2022), ENTSO-E already wants to study the need for a cable between Romania and Azerbaijan’s neighbor Georgia through the Black Sea. The two submarine cables, with a combined capacity of one gigawatt, could be operational by 2029, according to the plan. In the long term, the EU could well use additional green electricity from the Caucasus for its own coal phase-out and the transition from gas-fired heating systems to electricity.

Turbine affair disrupts EU schedule

Within days or weeks, however, the Union will have to find answers to Gazprom’s endless maneuvers. As the Russian newspaper Kommersant reported yesterday, the disputed Siemens gas turbine was flown from Canada to Germany on Sunday.

The turbine was taken from a compressor station on the Nord Stream 1 pipeline, where maintenance work is currently underway and is expected to be completed on July 21. Gazprom claims the turbine is “of vital importance” to the pipeline’s operation – something the German Ministry for Economic Affairs denies. According to the Kommersant report, however, Russia’s stories surrounding the turbine have the potential to disrupt the EU’s schedule.

On July 26, the energy ministers in the Council plan to agree on a joint response to the possible halt of Russian gas supplies. Now, however, according to the paper, the turbine is not expected to arrive in Russia until around July 24, and its installation will take another three to four days.

It could be early August before gas actually starts flowing through Nord Stream again – decisive days after the Energy Council in Brussels. For weeks now, experts have been warning that Russia wants to further weaken the EU community by using ever new pretexts and smokescreens to delay decisive steps by the EU to save gas.

Hungary fully relies on Turkstream

Another step toward permanently weakening Nord Stream 1 could happen further south on the continent. Hungary is in talks with Russia to divert all gas supplies to the Turkstream pipeline, Foreign Minister Peter Szijjarto announced Monday. Hungary receives gas via Serbia from Turkstream. Szijjarto said the move was necessary because supplies from the west via Austria were becoming more uncertain.

Sanctions expert Janis Kluge of the German Institute for International and Security Affairs sees this as a calculated move: “This would allow cutting off Ukrainian transit and NordStream1 without abandoning Orban.”

In contrast, experts already expected another announcement by Gazprom on Monday. The Russian state-owned company explained the failure to deliver gas to Uniper as force majeure. Uniper had received a letter from Gazprom Export, a spokesperson for the energy supplier said.

Gazprom speaks of ‘force majeure’

In the letter, Gazprom Export had retroactively claimed “force majeure” for past and current gas shortages. However, according to the spokesman, Uniper does not consider this valid and has formally rejected this claim.

As Reuters previously reported without naming the company, Gazprom is said to have declared force majeure retroactive to June 14. The notice is intended to absolve the company of compensation claims. Gazprom first declared it would cut supplies through Nord Stream 1 on June 14.

Against this background, an appeal by the International Energy Agency (IEA) on Monday morning must be seen as a final warning. IEA Director Fatih Birol called on the EU to take five immediate measures – from auctions for industrial gas waivers to joint emergency plans. With dpa, rtr

Charging infrastructure expansion: one step away from agreement

By

Lukas Knigge

Now that the EU Parliament and the EU Ministers of the Environment have agreed to phase out the internal combustion engine by 2035, representatives of the automotive industry are pressing all the harder for the rapid expansion of the charging infrastructure. The framework conditions and clear targets that create the conditions for the ramp-up of electromobility are lacking, explains VDA President Hildegard Müller.

The level of ambition of the Commission’s proposal for the so-called Alternative Fuel Infrastructure Directive (AFIR) is not sufficient, according to the European Automobile Manufacturers Association (ACEA). “While some countries are powering ahead when it comes to infrastructure rollout, the majority are lagging behind,” says ACEA Director General Eric-Mark Huitema. “The stark disparities demonstrate the need for strong AFIR targets that are harmonized across all EU member states.”

AFIR parliamentary rapporteur Ismail Ertug (SPD) has been trying to raise the level of ambition since taking over the dossier. But he has found himself repeatedly held back in negotiations in the past. While other parts of the Fit for 55 package have already reached the trilogue, the AFIR is still awaiting a vote in Parliament. The member states have already set their general direction in the Council of Transport Ministers.

Criticism of political advisors

Most recently, Ertug openly criticized the political advisors of the groups, canceled the technical meetings of these same advisors, and raised the negotiations to the exclusive concern of the rapporteurs and shadow rapporteurs in order to speed up the process. Apparently with success. At the last shadow meeting before the summer break at the end of last week, many of the questions that were still unresolved were clarified.

The mandatory expansion volume for member states per registered EV and plug-in hybrids has been defined. The gradual requirements depending on existing fleets of both vehicle classes are in line with the proposals in the rapporteur’s first draft. Ertug now says he has a majority for these.

However, due to pressure from some member states, flexibilities were granted for so-called “sparsely populated areas”. “In order for public money to be used as sparingly and purposefully as possible, there needs to be limited flexibility, coupled to the actual traffic flow, for infrastructure targets,” says EPP shadow rapporteur Jens Gieseke.

13 such sparsely populated regions are clearly defined by the EU. They are mainly located in northern Sweden, northern Finland and central Spain. These regions were defined using data from the population registration offices. For the expansion of the charging infrastructure, however, attention was also paid to the traffic density of these areas. This means that no exceptions are made for sparsely populated regions with high traffic volumes (e.g., transit traffic).

Ismail Ertug also had to compromise on the minimum coverage of charging infrastructure. A minimum requirement for infrastructure expansion is intended to prevent countries from circumventing their expansion obligations by not registering EVs or hybrids. By the end of 2027, all countries are to provide enough charging stations to theoretically supply an EV share of three percent of their respective passenger car fleets. By the end of 2030, the target is five percent. Ertug originally wanted higher targets.

The nine so-called “outermost regions”, also defined by the EU, are completely exempt. These include remote island regions such as the Azores, Madeira and the Canary Islands and French Guiana.

LNG expansion for trucks continues for the time being

Ertug had to make another concession on heavy-duty road transport. In his draft report, he called for a halt to the expansion of LNG for trucks, as this posed risks for stranded assets and lock-in effects of fossil technologies. Jens Gieseke, on the other hand, called for the expansion of LNG infrastructure, saying liquefied natural gas was needed as a temporary solution to become independent of Russian oil. The compromise lies in the Commission’s proposal, which does not specify any explicit LNG expansion targets, but merely consolidates the existing expansion targets valid until 2025. Accordingly, there must be an LNG refilling station every 400 kilometers in the TEN-T core network.

Despite the compromises, the EPP shadow rapporteur believes that after the summer break, when the negotiations continue, there will still be “a few thick planks to be drilled”. The discussion on the specific regulations for private parking spaces, for which the rapporteur wants to introduce a charging station obligation, is still open, says Gieseke. From the EPP’s perspective, however, the AFIR is the wrong place for this. Such regulations would instead have to be regulated via the Energy Performance of Buildings Directive (EPBD).

This concerns private parking lots with more than 30 spaces, which would mainly affect supermarkets. To clarify this issue, Ertug says he involved Parliament’s legal advisers. They have confirmed that supermarkets are excluded from the Building Efficiency Directive. Ertug is therefore convinced that the AFIR is the right place for such a regulation – even if it regulates inside private property. However, Ertug stresses, charging stations in private parking lots could count toward a member state’s overall expansion goals.

Definition of alternative fuels

Another open question is how alternative fuels will be defined in the directive. Various proposals from the different parliamentary groups envisage a multitude of different definitions. To avoid the debate from the very beginning, the rapporteur would rather refer to the Renewable Energy Directive (RED), which is being negotiated in the Environment Committee. Here, he believes that the AFIR is not the right place to clarify definitional matters.

One final shadow meeting is to be held on September 7. There, Ertug wants to clear up all the outstanding issues so that he can then proceed to the vote in the Transport Committee. In October, the parliament will then decide on the report, at least according to the current timetable.

Petersberg Climate Dialogue: Timmermans insists on mitigation

Financial support for loss and damage resulting from climate change, as well as climate adaptation, are high on the list of priorities at this year’s Petersberg Climate Dialogue in Berlin, especially for countries in the global South. On Monday, Frans Timmermans nevertheless pointed out the need to reduce emissions – also known as mitigation.

Adaptation and loss and damage won’t help if you don’t get better at mitigation, the EU Commission’s Executive Vice President said in his statement. “There is no level of adaptation and loss and damage that will be able to address the issue if we do not do better on mitigation.”

Molwyn Joseph, Minister of Environment for the island nation of Antigua and Barbuda, countered that mitigation, adaptation, and loss and damage are not competing principles. There were funding opportunities for all three, he said. He, therefore, called for loss and damage to be placed on the agenda of this year’s global climate conference (COP27) in Sharm El-Sheikh.

In addition, as a representative of the Alliance of Small Island States, he reminded who is primarily responsible for climate change. “The industrialized countries that are causing the emissions need to step up their efforts,” Joseph said, pointing out that small island states contribute the least to climate change but are already clearly feeling its effects.

German government announces climate protection umbrella

The German government now wants to live up to this responsibility and presented a concept for a protective umbrella against risks and damage in developing countries on Monday. The proposal is aimed at regulations for early warning systems in particularly vulnerable countries, precautionary plans and rapid financing systems in the event of damage events, as the Development Ministry announced on Monday.

“We need to acknowledge that there is climate damage and that the most vulnerable countries, in particular, need our solidarity to deal with it. Here, we want to build bridges for the next World Climate Conference in Egypt with concrete solutions to problems,” explained State Secretary Jochen Flasbarth.

The extent to which Germany alone suffers from the consequences of climate change has been examined in a study commissioned by the BMWK and BMUV. Since 2000, climate change is said to have caused damage amounting to €6.6 billion per year, according to the Prognos study, which was presented on Monday. In total, the costs have been at least around €145 billion. This is reportedly only a portion of the damage that has occurred. The actual amount of damage is even higher than the sum mentioned, as some damage, such as the loss of biodiversity, cannot be quantified. luk with dpa

EU report: majority of Europe threatened by drought

According to a report by the EU Commission’s Joint Research Center, a large part of the European Union’s territory is threatened by drought. At the end of June, 46 percent of land was at a drought warning level two, and 11 percent was at the highest of three warning levels, according to data released Monday. Severe drought, which has affected several regions of Europe since the beginning of the year, continues to spread and worsen, the report said. This is due, for example, to a lack of precipitation combined with heat waves.

Climate change is increasing the risk of severe droughts and forest fires around the world, stressed Marija Gabriel, European Commissioner for Research. “With this report, we have a better understanding of the situation in order to protect our forests, our crops and our waters,” Gabriel said.

Water and heat stress caused crop yields to decline further. France, Romania, Spain, Portugal and Italy are likely to struggle with this decline in crop yields, according to data from the EU Commission. Germany, Poland, Hungary, Slovenia and Croatia are also likely to be affected to some extent.

The Commission also declared on Monday that it would mobilize further aid through the Civil Protection Mechanism to fight severe forest fires across Europe. Firefighting aircraft from the rescEU fleet have reportedly been deployed to Slovenia and France in recent days. In addition, the Copernicus satellite service has been activated “to assist the French authorities in monitoring the forest fires in the southwest of the country,” the Brussels-based agency said. dpa/luk

Single market: setback for planned crisis instrument

According to information obtained by Europe.Table, the EU Commission needs to rework the planned Single Market Emergency Instrument. According to EU sources, the Commission’s internal Regulatory Scrutiny Board has identified flaws in the impact assessment. Those responsible under Commissioner for the Internal Market Thierry Breton must now work at full speed to improve the proposal to be able to present it as planned in Ursula von der Leyen’s State of the Union address on September 13.

The authority stated that the Regulatory Scrutiny Board’s (RSB) criticism primarily concerns governance structure. Specifically, the issue is which phase of a crisis could be declared under what circumstances. This determines which instruments can be activated. The Commission did not comment officially on this matter.

This crisis instrument is intended to ensure that the EU is better prepared for events such as the Covid pandemic or the Russian attack on Ukraine. In the first wave of the pandemic, governments closed their borders, sometimes in an uncoordinated manner, and there was a shortage of important goods such as protective masks. The Commission wants to use the new tool to improve information flows and ensure critical goods and services remain available.

The proposal is expected to be based on two pillars. The first pillar of crisis preparation is likely to include monitoring of supply chains for goods classified as critical, including transparency obligations for companies, as well as requirements for the stockpiling of certain raw materials, for example.

The second pillar is aimed at responding to acute crises. The measures under discussion include more leeway for the joint procurement of goods by member states. In the event of a crisis, companies could be subject to new obligations, such as export controls or the prioritization of orders for urgently needed products.

Nine member states have warned in a letter that the crisis instrument should not intervene unnecessarily deeply in the economy. The EPP Group’s spokesman on internal market policy, Andreas Schwab, warned that the Commission must ensure that the member states leave the borders open even in the event of a crisis – after all, the single market would be a source of prosperity. In addition, he said, it should be ensured that companies “have sufficient stocks of critical products in Europe”. Where they produce them, on the other hand, should be left up to the companies. tho

Council lifts trade barriers for agricultural imports from Moldova

EU agriculture and trade ministers decided on Monday to temporarily liberalize trade in seven agricultural products from Moldova. Tomatoes, garlic, table grapes, apples, cherries, plums and grape juice were still subject to restrictions. Once the new regulation enters into force, Moldova will be able to export at least twice the amount of these products to the European Union duty-free for one year.

“We cannot ignore the impact of the Russian war of aggression against Ukraine on Moldova,” warned Jozef Síkela, Czech Minister of Industry and Trade. With these exceptional measures, the EU is deepening its trade relations with Moldova and is supporting the stabilization of Moldova’s economy. luk

EU steps up fight against disinformation

The EU fears being put on the defensive by disinformation and manipulation from Russia. The foreign ministers now want to take countermeasures – with a new toolbox, they decided on Monday at the Foreign Affairs Council in Brussels. The EU Commission and Josep Borrell, the EU’s High Representative of the Union for Foreign Affairs, were tasked with drafting this “hybrid toolbox” to counter threats, which are summarized under the acronym FIMI (“Foreign Information Manipulation and Interference”).

The background is the war in Ukraine and the dispute over Ukrainian grain exports. The EU accuses Russia of deliberately blocking exports and thus triggering a food crisis in the Middle East, Africa and other regions of the world. Russia rejects this claim; the African Union has also expressed reservations about the European narrative. Senegal’s President and AU head Macky Sall said EU sanctions were also causing supply problems.

This controversy was an example of the “war of narratives,” Borrell said. The EU is at risk of losing this war, he said, and now wants to counter it. As another example, he cited the claim that the oil embargo imposed by the EU on Russia has driven up oil prices. Borrell stressed that the opposite was the case at the meeting of foreign ministers. However, he left open the question of how the EU intends to counter this.

In the Outcome of Proceedings, the Foreign Affairs Council mentioned a number of tools that should be used more systematically than in the past. These include improving awareness of the situation through the Single Intelligence Analysis Capacity, as well as resilience and capacity building, regulatory and diplomatic measures. However, the main responsibility in the fight against disinformation lies with the EU states, the paper said. ebo

Circular economy: potential for trade between the EU and China

The EU is seeking greater cooperation in international trade toward its goal of a circular economy. In bilateral trade agreements, which regulate around 40 percent of the EU’s total trade volume, the circular economy has so far rarely been explicitly mentioned. However, there is great potential with trading partners such as China, especially for plastics and textiles. This is according to the Institute for European Environmental Policy (IEEP) in a policy briefing published yesterday.

In the report, the institute assesses how the EU could support the transition to and adoption of the global circular economy through its trade frameworks and international cooperation. Based on case studies, including trade relations with China, the IEEP drafts recommendations for policy action.

To increase the use of trade agreements as a tool for cooperation on the circular economy, IEEP recommends “strengthening the Trade and Sustainable Development (TSD) Chapters for circularity, by including more explicit commitments to cooperation on circularity and securing the Paris Agreement as essential element of all trade agreements going forward.” The EU should also increasingly share and harmonize “knowledge regarding circular economy legislation, data collection methods, monitoring frameworks and begin to close data gaps on the flow of material and energy resources“.

International standards necessary

The EU should also promote multilateral dialogues and cooperation on the circular economy. For example, a common definition for the circular economy could be developed within the Trade and Environmental Sustainability Structured Discussions (TESSD) of the World Trade Organization (WTO). Standards could be developed and harmonized internationally through the International Organization for Standardization (ISO) or the World Customs Organization (WCO).

Furthermore, the EU should embed principles of the circular economy in development cooperation programs such as “Aid for Trade”. The gap between industrialized and developing countries must be prevented from widening with regard to the distribution of benefits from the circular economy.

The EU and China have not yet signed a bilateral trade agreement. Trade is therefore conducted on WTO conditions. For the development of a circular economy and sustainable trade, according to the IEEP report, China’s and the EU’s strategies to promote sustainable plastics and textiles, in particular, are a solid foundation.

Similar targets for plastics and textiles

There are legislative similarities regarding plastics: These include the ban on some plastic products (plastic bags, disposable tableware and cutlery, microplastics in personal care products), the promotion of alternatives to plastics, and the improvement of the infrastructure for plastic recycling. Chinese plastic products have so far not been required to contain a certain proportion of recycled plastic, while the EU continues to increase the proportion of recycled plastic.

Regarding textiles, both China and the EU are also planning policies to address environmental impacts and the circular economy. Both also aim to increase the recycling rate for textiles, minimize the final disposal (in landfills, for example) of textile waste, and counter the trend toward “fast fashion”. In addition, the EU’s intention to restrict textile waste exports and China’s ban on textile waste imports complement each other. This would offer potential for a greater circularity in the global textile economy.

The EU has set the goal of a circular economy in its Circular Economy Action Plan (CEAP). In March, the EU Commission presented a first package of measures, and has announced a second for the end of November. leo

EU ambassador designate shocks with Taiwan statement

An interview of the future EU ambassador to China has generated attention over a statement on Taiwan. Speaking to the Catalan daily La Vanguardia, Jorge Toledo Albiñana said “the EU does not defend the independence of Taiwan, but the peaceful reunification“.

Afterward, Toledo swung back to the old familiar line: “We believe that there should be only one China, but in the event of a military invasion we have made it very clear that the EU, with the US and its allies, will impose similar or even greater measures than those we have now taken against Russia,” he added. The One-China-policy is the common position of Brussels regarding the status of Taipei. But the fact that Toledo spoke of a “peaceful reunification” was criticized on social media.

Toledo also commented on other China policy issues in the interview. Decoupling exists, “but not by the will of China”. For example, the West has recognized the need to rethink its production. “The pandemic exposed the vulnerability of value chains,” Toledo said. China’s exports to Europe, however, continue to grow, the diplomat said.

The EU ambassador-designate to China also spoke on national issues, saying, “China has lifted nearly 800 million people out of poverty. This is a free market success, not communism.” However, as in any country that develops very quickly, there would come a time when it cannot continue to grow as fast. “The demographic pressure on the economy is enormous,” Toledo said.

Until recently, Toledo was Spain’s ambassador to Japan. According to the report, he is expected to take up his post as EU ambassador in September, succeeding France’s Nicolas Chapuis. ari

Report: Xi invites EU heads of government

According to a report, European leaders have been invited to meet Chinese President Xi Jinping in Beijing in November. This was reported by the South China Morning Post on Monday. According to SCMP, the invitation is said to have been sent to German Chancellor Olaf Scholz, French President Emmanuel Macron, Italian Prime Minister Mario Draghi, and Spanish Prime Minister Pedro Sánchez. It is now up to the Europeans to decide whether to accept China’s invitation, SCMP said.

A meeting in November would be immediately after the 20th Party Congress in October. The fact that Xi is inviting European leaders to China in November indirectly confirms what basically all observers assume: namely, that Xi Jinping will get a third term as president. The meeting would mark the return of face-to-face diplomacy between Europe and China – after almost three years of strict zero-COVID policies that have made face-to-face exchanges between the leaders of Europe and China impossible. rad

How the fuel discount became a bone of contention

By Christian Küchen

For a month, from mid-May to mid-June, the discussion about the so-called fuel rebate kept large parts of Germany on tenterhooks. What had happened?

Here is a brief recap: With the end of many Covid lockdowns and then again with the start of the Ukraine war, prices for gasoline and diesel had risen significantly around the world and thus also in Germany. As a result, taxes on fuel were lowered in many countries – first in Poland, followed by Italy, France, the UK, the Czech Republic and finally Germany: The German parliament passed a fuel rebate on gasoline and diesel for three months from June to the end of August.

EU embargo against Russia

Anticipation was high, but in mid-May of all times, a perfect storm hit the international mineral oil markets. The reasons ranged from the EU’s embargo decision against Russia to a sharp rise in spring gasoline demand in the USA. At the same time, refinery outages in North America and Europe – due to maintenance, unforeseen plant malfunctions and logistics bottlenecks – led to lower fuel production.

As a result, product prices rose worldwide and, with them, gas station prices. In the USA, motorists paid more than $5 per gallon for the first time. In Germany, the price of a liter of Super E10 rose by 16 cents in May, while diesel increased by 6 cents within a week at the end of the month.

Fuel tourism from Denmark and Benelux

Many observers thought that this development was unique to Germany and suspected a connection with the fuel rebate. However, a glance at neighboring EU countries would have shown that the price increase was not a German phenomenon. The massive increase in fuel tourism from Denmark, Belgium, Luxembourg and the Netherlands to Germany at the beginning of June could also have changed this perception, but mainly received increased attention in the border regions.

The fuel rebate was thus well received by customers – and it came at just the right time, when fuel prices were on the rise around the world. Instead, it was not perceived as a relief in many cases. There was a suspicion that the industry was keeping part of the energy tax cut.

Refineries closed in many countries

What was the cause of this perception? First and foremost, by comparing gas station prices with crude oil prices – which have not risen as sharply – and concluding that the fuel discount does not fully benefit the customer. But in fact, consumer prices follow world market prices for gasoline and diesel – and not crude oil prices. In the past, this important difference was often overlooked because sufficient refinery capacity was available and enough products could always be made from crude oil.

This situation changed fundamentally at the latest with the outbreak of the Ukraine war: It is not crude oil on the world market that is in short supply, but gasoline and diesel at the gas pump. One reason: During the Covid pandemic, refineries had been closed in many countries. When demand picked up again, these capacities were missing. As a result, fuel prices decoupled from the oil price. This decoupling was most recently accelerated by the EU import embargo against Russia.

It’s not just about crude oil: All EU member states combined have imported an average of around 20 million tons of diesel per year from Russia in recent years. So the fuel produced in refineries there also has to be replaced – further exacerbating the product shortage.

Green hydrogen needs investment

It is indisputable that many of our fuel refineries are earning more money with higher product prices than the long-term average, despite the significant increase in energy costs. However, it is equally indisputable that these refineries have incurred losses, in some cases heavy ones, in recent years due to the Covid-induced slump in demand. This has to be kept in mind when discussing “excess profits“.

Refineries are now facing investments in the billions to switch from fossil energy to carbon neutrality. They are predestined to enter large-scale green hydrogen production. However, such risky investments are not becoming more likely when there is a perceived risk that future profits may be siphoned off, sanctioning market-based outcomes. At the end of August, the fuel rebate in Germany will expire. It is foreseeable that there will once again be considerable discussion about local gasoline and diesel prices. But even then, the same applies in Germany as elsewhere: Consumer prices depend fundamentally on the global market prices.