The price of energy dependency in Europe
- Mar 24
- 8 min read
The war with Iran exposes the cost of reliance on imported fossil fuels. Spikes in oil and gas prices are symptoms of a deeper vulnerability. Accelerating Europe's energy transition is not only about decarbonization, but about strengthening energy security and insulating the region's economy against volatility.
Authors:
Tommaso Buso, BwB Vice President and M. Belén Ortíz Torres, BwB Associate
With contributions from:
Alison Shaw, Alvar Gener, Delphine Queniart, Lisa Engelen, Stephen Pack and Rupesh Madlani
Ursula von der Leyen has highlighted Europe’s energy vulnerability with striking clarity: in just 10 days of war, Europeans spent an additional €3 billion on energy imports, with gas prices rising by 50% and oil by 27% due to disruption.
“That is the price of our dependency,” she told lawmakers.[1]
These shocks underscore the value of energy sources less exposed to fuel price volatility – such as renewables, whose generation costs remain largely stable once installed.
At the same time, von der Leyen has acknowledged that Europe’s retreat from nuclear power was “a strategic mistake,” arguing that nuclear and renewables together can guarantee a high degree of energy independence and security of supply.[1] The implication is clear: reducing exposure to fossil fuel markets requires scaling all forms of domestic low-carbon energy, rather than replacing one dependency with another.
The temptation is to treat rising fossil fuel prices as a temporary spike – a story for traders, or for finance ministers watching inflation prints. But that is how Europe keeps relearning the same lesson. Fossil fuels are not only a climate problem. They are a strategic exposure that can quickly turn distant violence into rising domestic bills.
A global market, shared vulnerabilities
When conflicts impact global oil and gas transport systems, Europe is rapidly exposed due to the large share of its energy that is imported from outside the region. But Europe is not alone. Asian economies are even more vulnerable to the current disruption in the Strait of Hormuz, given their higher dependence on Gulf oil and LNG trade flows.[2] China receives 37.7% of the oil exported through the Strait, while India receives 14.7%, compared to 3.8% for Europe.[3] But this does not reduce Europe’s vulnerability because oil and gas prices are set in global fossil fuel markets. These markets transmit shocks across regions, forcing economies to compete for the same constrained supply when crises hit.[2]
The scale of Europe’s exposure is structural, not exceptional. European Commission (EC) analysis puts the EU’s energy import bill at €427 billion in 2024, down from a peak of €604 billion in 2022 – and still described as a “significant drain” on the economy.[4] Eurostat’s separate trade accounting puts 2024 imports of energy products at €375.9 billion.[5] Different methods, same reality: Europe is still writing very large cheques abroad to sustain its economy.
Oil and gas are embedded costs, impacting transport, food, chemicals, metals, logistics and, ultimately, interest rates. One recent estimate suggests that if oil holds at around US$100 a barrel, EU drivers will collectively pay €55 billion more for fuel over a year – an average of around €220 per driver.[6] This is not a moral cost. It is the ‘hard reality’ cash cost of exposure.
Managing shocks is not the same as reducing risk
The policy reflex in crises is familiar: cap prices, subsidies bills, race for cargoes, and reach for ‘temporary’ measures that often outlive the emergency. These actions are not without value. But they are treatments, not cures. Curing the ailment requires addressing the root cause – continued significant exposure to imported price risk.
One recent analysis offers a disciplined way to assess the downside without catastrophizing. Capital Economics outlined scenarios from a short two‑week conflict to a more destructive war, prolonged into late 2027, that damages export infrastructure across the Gulf region. In the most severe scenario considered, up to 8-9% of global oil and LNG exports could be affected. Oil prices could reach US$150 a barrel; while EU gas costs could rise to €120 per megawatt hour (see Figure 1).[2]
Figure 1: Scenario projections for oil and gas prices[2]
Europe’s buffers are thinner than they appear in political speeches. Economic think-tank Bruegel notes that Europe entered 2026 with materially lower gas storage than in recent years: 46 billion cubic meters at the end of February versus 60 billion in 2025 and 77 billion in 2024. Lower storage is not just a technical detail. It reduces the region’s ability to absorb disruption and increases the likelihood that Europe will end up bidding against Asia for flexible LNG cargoes, at prices determined by a tightening market.[7]
When governments reach for emergency levers, they reveal how exposed the system remains. The Financial Times recently reported that the International Energy Agency (IEA) made its largest‑ever release of oil reserves – 400 million barrels, including 172 million from the US Strategic Petroleum Reserve – after Brent surged amid major concerns over transit through the Strait of Hormuz.[8] The IEA states that its members hold more than 1.2 billion barrels of public emergency stocks plus roughly 600 million barrels held by industry under government obligation.[9] These stocks are valuable. They are also an admission: Europe’s energy security still relies on managing fossil fuel volatility, not escaping it.[10]
From decarbonization to security
This is the context in which the case for renewables stops being pious. Wind and solar, alongside nuclear and batteries, are not only low carbon – they also provide a form of price insurance because their marginal fuel cost is effectively zero once installed. If the past decade has demonstrated anything clearly in the energy sector, it should be that ‘transition fuels’ such as LNG can become transition dependencies. Such fuels may diversify away from individual suppliers, but they also tie Europe to a global market shaped by shipping routes and chokepoints that are no less geopolitical than the pipelines they replaced.
The argument is not that Europe can switch off oil and gas tomorrow. Nor would decarbonizing electricity alone eliminate the region’s exposure. Oil still dominates transport, and gas remains central to heating and large parts of industry. The strategic value of renewables lies not only in generating clean power, but in enabling electrification – electric vehicles, heat pumps, and industrial processes – that can gradually displace imported fuels. The security dividend comes when clean electricity substitutes for fossil fuel demand, not simply when it is added to the system.
This points to a broader conclusion: dependency is not a neutral economic choice. The EC itself frames high and volatile prices as a function of imported fossil fuels and argues for “homegrown clean energy”.[4] The security logic is clear – and it is already embedded in official policy.
Europe has also quantified official estimates of the upside. The EC’s Affordable Energy Action Plan estimates savings of €45 billion in 2025, rising to €130 billion a year by 2030 and €260 billion a year by 2040.[11] These figures can be read as the inverse of von der Leyen’s €3 billion in 10 days: reduced exposure means fewer war‑driven transfers out of Europe’s economy.
And there is already evidence that this hedge is effective. Ember estimates that new wind and solar added in the EU since 2019 have avoided €59 billion in fossil fuel import costs. This is not a modelled future. It is a realized benefit from assets already built.[12] It also hints at a key strategic point that many capitals still resist: the cheapest energy security is the energy that does not need to be imported.
The cost of not learning is visible in recent history. The Transition Security Project estimates the 2022 energy shock cost the EU and the UK around US$1.8 trillion (€1.7 trillion) from 2022 to 2025. Europe cannot subsidize itself through every geopolitical shock. It must either invest in structural resilience or continue to pay repeatedly for emergency relief.[13]
Where exposure becomes immediate
Cities are where the risks of 'business as usual' come into sharpest relief. They are not a sideshow but the front line of Europe’s energy exposure. NetZeroCities, which supports the EU’s 100 Smart and Climate-Neutral Cities by 2030 Mission, notes that cities account for more than 70% of global CO₂ emissions and are home to 75% of EU citizens[18] – concentrating vulnerability but also potential solutions.
At the city scale, exposure is immediate. Gas-dependent homes and buildings translate geopolitical shocks directly into rising energy costs. District heating is one of the clearest levers – whether through developing new systems or transitioning existing networks towards electrification, large-scale heat pumps, and geothermal. This is a core focus of BwB’s work with cities: structuring and financing the shift away from gas-based systems so that, once decarbonized, import exposure is dramatically reduced.
Similar efforts to build resilience into the energy system are emerging with urban energy communities. By enabling local generation and shared infrastructure, they can reduce costs for residents while limiting the pass-through of global fossil fuel price spikes into everyday bills. Here too, the work is not theoretical: BwB is supporting cities to design bankable projects and delivery models to turn these concepts into deployable assets.
Financing is both the constraint and the catalyst. Rising fossil fuel volatility – driven by current wars and unknown future shocks – should improve the relative economics of renewable district heating and urban energy systems, pulling more private capital in that direction. The bottleneck is the financing architecture to scale this transition: instruments that can mobilize upfront investment, de-risk projects, and align public and private actors. This is precisely where BwB operates – bridging policy ambition and project delivery so that resilience is built into the system, rather than improvised in crisis.
Energy security is economic security
A serious conversation about European sovereignty should start with a simple distinction. Defence spending buys deterrence. Energy policy can buy insulation from shocks. The Iran war is not a reminder that Europe should buy more non-renewable energy. It is a reminder that Europe must invest in reducing its exposure.
Figure 2: Modelled energy prices effects on Global GDP[2]
The views expressed are those of the authors and do not necessarily reflect those of any organizations or consortiums with which they are affiliated.
References
[1] DRM News. (2026, March 10). FULL SPEECH: EU's Ursula von der Leyen calls Europe’s nuclear exit a “strategic mistake” [Video]. YouTube. https://youtu.be/Q-Pa6_CICjM
[2] Financial Times. (2026). The economic consequences of war with Iran. https://www.ft.com/content/dab7d625-77f8-40ff-aeb9-451f81772125
[3] Conte, N. (2026, March). Oil and gas charted: Oil trade through the Strait of Hormuz by country. Visual Capitalist. https://www.visualcapitalist.com/charted-oil-trade-through-the-strait-of-hormuz-by-country/
[4] European Commission. (2025). Energy prices and costs in Europe. https://energy.ec.europa.eu/data-and-analysis/energy-prices-and-costs-europe_en
[5] Eurostat. (2025). Imports of energy products to the EU down in 2024.
[6] The Guardian. (2026, March 12). European drivers face €220 a year jump in fuel costs due to Iran conflict. https://www.theguardian.com/money/2026/mar/12/european-drivers-fuel-costs-jump-iran-conflict
[7] Bruegel. (2026). How will the Iran conflict hit European energy markets? https://www.bruegel.org/first-glance/how-will-iran-conflict-hit-european-energy-markets
[8] Financial Times. (2026). IEA releases record oil reserves to counter Iran war energy shock. https://www.ft.com/content/9b623bca-bc3a-4081-b1c7-f57d83ea225e
[9] International Energy Agency. (2025). Statement by Executive Director Fatih Birol. https://www.iea.org/news/statement-by-iea-executive-director-fatih-birol-on-his-participation-in-a-meeting-of-g7-finance-ministers
[10] Financial Times. (2026). Middle East war strengthens case for renewables, say clean energy experts. https://www.ft.com/content/001a7cb8-96a9-4b6c-95ad-d609976141c9
[11] European Commission. (2025). New action plan to save €260 billion annually on energy by 2040. https://commission.europa.eu/news-and-media/news/new-action-plan-save-eu260-billion-annually-energy-2040-2025-02-26_en
[12] Ember. (2025). European electricity review 2025. https://ember-energy.org/latest-insights/european-electricity-review-2025
[13] Transition Security Project. (2025). Trillion dollar bills: The costs of transatlantic dependence for Europe. https://transitionsecurity.org/trillion-dollar-bills
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