Oil price rise triggered by conflict limits Europe's energy options

The surge in oil prices across Europe following Israel's recent strike on Iran could undermine the continent's efforts to diversify its energy choices, experts say.

Early on Thursday, Brent crude — widely considered as the benchmark for European oil — rose to $77.40 a barrel, up about 10 percent from a week earlier and nearing its highest level since January.

The price spike came just days after Israel launched an attack on Iran's nuclear facilities, prompting the evacuation of more than 300,000 residents from Teheran.

The effects are already being felt at the pump. In Belgium, official prices for key fuel products — B7 diesel and H0/H7 gas oil — have risen, with the supplier's website displaying upward arrows beside both.

Francois Villeroy de Galhau, governor of France's central bank, said on Tuesday that the European Central Bank was "in a good position" after cutting interest rates to 2 percent. However, he pointed to growing uncertainty as the conflict in the Middle East continues to push oil prices up sharply.

Lin Boqiang, dean of the China Institute for Studies in Energy Policy at Xiamen University in Fujian province, said the current rise can still be considered to be mild, but warned that prices could increase faster if regional instability worsens, such as the potential closure of the Strait of Hormuz.

According to the European Union's statistics agency Eurostat, Iraq, Saudi Arabia and the United States accounted for 6.5 percent, 7.5 percent and 15.5 percent, respectively, of oil exports passing through the Strait of Hormuz in 2023.

Liu Litao, an associate professor of international studies at Nanjing University in Jiangsu province, said Europe's alternative oil import channels are limited.

"Pipes from Russia hardly work anymore since the outbreak of the Russia-Ukraine conflict in 2022, while the civil war in Libya has curbed supply from Africa," Liu told China Daily.

"Therefore, Europe has to take the Middle East and the US as two key energy suppliers. But now, (with the latest instability,) the first path looks rather fragile."

Both Liu and Lin said that if the Strait of Hormuz were to be closed, the EU would have little choice but to turn to the US for oil, which might further curb its strategic independence.

The best outcome for both the EU and the global community is for the situation to be brought under control and order restored in the Middle East, Liu said.

A comment on Euractiv.com, a pan-European media network that specializes in EU affairs, noted, "Should the conflict persist, oil prices will almost certainly remain elevated, exacerbating the woes of Europe's long-suffering energy-intensive industries and potentially triggering a resurgence in price pressures that have eased considerably in recent months."

Qin Yan, a principal analyst at ClearBlue Markets in Oslo, Norway, said the possibility of oil prices going up too far is not good, considering the fact that the world economy remains weak.

"Oil prices are determined by the supply-demand relationship," she said.

"If it goes too high, for example, beyond $80 a barrel, quite a number of industries might have to curb production, instead of buying the expensive oil."

She also cited a report published by Morgan Stanley on Monday that gave three possible scenarios for oil prices in Europe, with the worst being that oil exports from the wider Gulf region are put at risk, in which case, "2022-style prices would not be out of the question".

zhangzhouxiang@chinadaily.com.cn