Thank you, Kyriákos, for your invitation to address ministers today on energy security.
Three months into the Middle East war, global oil supply remains down by some 13 percent relative to pre-war levels, and global LNG supply by some 20 percent.
The impact of this war is very asymmetric, depending on whether countries are taking direct hits, who is a net importer or exporter of oil and gas, and who has policy space.
Low-income countries and emerging markets reliant on imports are hit especially hard by the higher fuel and fertilizer prices.
So let me start with an appeal. Europe: standing in solidarity with the broader international community, please step up to support the hardest hit and least fortunate countries, wherever they may be, including by facilitating their access to fertilizers and critical refined products such as diesel.
And as for this continent, I want to start with a big thumbs-up: congratulations to Europe for the visionary policies you have pursued over the years—your steadfast emphasis on the energy transition.
These policies have cut the energy intensity of EU output by more than 40 percent over 30 years while also cutting oil dependence. They leave Europe far less exposed than might otherwise have been the case.
Those of you who are veterans of 2022 know that today’s gas price shock is much smaller than what Europe saw last time around. But for oil, the shock is almost as large. So far, the main effects are in transport costs. Over time, however, reserves could deplete and, yes, winter will come, adding heating costs to the mix.
Some things don’t change, of course, and political economy is one of them: governments once more feel the pressure to provide broad-based fiscal support.
Most of your new measures are temporary—bravo—even if sunset clauses may not be watertight. And well done also for keeping the fiscal costs much lower than in 2022—very important!
That said, I regret that most of the new measures are again untargeted, muting the price signal. The result? Less energy savings—with global spillovers and damaging impacts for poorer nations—as well as reduced fiscal efficiency.
In response to the 2022 shock, over two-thirds of EU support was poorly targeted or price-suppressing. A better-targeted plan—fully protecting the poorest 40 percent of households but stopping there—would have saved almost two-thirds of the fiscal cost. Instead, the wealthiest quintile received nearly three times more than the poorest.
Let us learn the lessons: this is why we at the IMF urge that any further support be targeted. Our advice? Use the temporary state aid provisions in ways that ensure needed energy savings still happen.
And as you help households and firms adjust in the short run, please stay laser-focused on the long-term goal of energy security. Yes, Europe has done much over the years. But more is needed.
Three more positives. One, policy actions taken after 2021 have canceled Europe’s energy dependence on Russia—a very big deal. Two, without the energy efficiency gains over the same period, we estimate the lasting damage to euro area GDP from the Ukraine shock would have been two-thirds larger. And three, despite some distortions, today we see tentative but positive signs of higher investment in energy efficiency.
Well done indeed. But still, let’s step back and recognize that the bitter experience of two massive energy shocks in four years is a call to urgent, high-priority action.
So here is my call: getting to energy union stands to address two interlinked problems—competitiveness and economic security. Let me offer three facts.
Fact one: energy prices in Europe are high by international comparison. This is especially true for electricity, where European industrial users have over the past few years been paying 2–3 times more than their competitors in the U.S. and China. This hurts competitiveness.
READ MORE: https://www.imf.org/en/news/articles/2026/06/11/sp061126-md-toward-a-european-energy-union
