The European Commission is treating the loss of refining capacity as a vulnerability that Europe can no longer afford to ignore.
Brussels is seeking to reverse two decades of declining oil refining capacity in the EU, with Energy Commissioner Dan Jørgensen warning that geopolitical instability and a prolonged squeeze on diesel supplies should serve as a “wake-up call”.
The prolonged war in the Middle East, including attacks on Gulf refineries, and Ukrainian strikes on Russian refineries have put further strain on an already tight global diesel market, driving up energy prices.
“We need to counter this trend and ensure that we have adequate and flexible refining capacity in Europe. Today and for the future. This is not just a matter of economic competitiveness. It is also a matter of security,” the Danish Commissioner told reporters on Wednesday.
Germany, Italy, Spain, the Netherlands, France and Belgium account for the largest share of the EU’s oil refining capacity. But around a quarter of the bloc’s refineries have closed over the past 20 years, reducing overall capacity by approximately 10%, according to the European Commission.
Brussels launched talks with European refiners on Wednesday to explore ways of boosting fuel production at existing facilities. Further technical discussions are planned, with another meeting scheduled for early 2027 to assess progress.
The Commission said the industry had put forward proposals that it would now examine, although it did not specify whether the plans would involve reopening closed facilities, expanding existing plants or investing in new capacity.
“We will work to increase outputs from refining assets in Europe. The industry has made some suggestions that we need to assess,” Jørgensen said.
Nonetheless, the initiative reflects a growing recognition in Brussels that securing supplies of crude oil alone is not enough. The EU must also have the industrial capacity to turn it into the diesel, jet fuel and other petroleum products its economy needs.
Diesel shortage threaten prolonged price pressures
The Commission expects the global diesel market to remain tight well into 2027, based on the latest insights from the International Energy Agency, prolonging pressure on fuel prices even if crude oil markets stabilise.
Refineries have so far helped maintain supplies, including jet fuel, but EU officials are concerned that the bloc may lack sufficient flexible capacity to respond to further geopolitical shocks.
Refining capacity has become a question of economic security as well as competitiveness for the EU, according to the EU’s top energy chief.
Dieselis essential to road freight, agriculture and industrial activity, while jet fuel is critical to aviation. Fuel availability also has implications for the bloc’s military mobility and defence readiness.
The Commission hopes that increasing domestic refining output will ease short-term supply constraints and reduce Europe’s exposure to external shocks.
However, boosting refining output would not necessarily translate into lower prices if crude oil costs remain high or global supply disruptions persist.
Balancing energy security and climate goals
The push to retain more refining capacity also raises a conflict of interests with the EU’s climate goals.
Brussels wants to reduce its dependence on imported fossil fuels, but it must still secure the fuels its economy consumes during the transition.
European refineries face pressure from high operating costs, competition from larger facilities abroad and the long-term prospect of declining demand for conventional transport fuels as electrification advances.
Reversing the decline could require substantial investment, but the Commission has yet to set out financial incentives, regulatory changes or concrete capacity targets.
Its immediate focus appears to be identifying measures that could increase production from facilities already operating in Europe.
Expanding output from existing refineries could offer a faster response to fuel shortages than building new plants, which require years of investment and permitting.
Reopening shuttered facilities or constructing new refineries would be more complex, with investors needing confidence that demand would justify the expense over the lifetime of the assets.
The challenge for Brussels is whether its talks with industry can deliver additional fuel supplies quickly enough to ease price pressures without encouraging investments that could become stranded assets as Europe moves away from fossil fuels.
Poland leads push to protect EU’s oil refineries
Ahead of a gathering of EU energy ministers on 29 October, Poland, Czechia and Slovakia urged Brussels to develop a long-term strategy to protect the EU’s oil refineries, warning that plant closures could deepen the EU’s dependence on imported fuels, according to a document seen by Euronews.
In a document seen by Euronews, the three countries argue that the Commission must balance its climate targets with the need to preserve domestic refining capacity, pointing to the Middle East crisis as evidence that supplies of diesel, aviation fuel and other refined products cannot be taken for granted.
“Security of crude oil supply and security of refined product supply are distinct challenges. Crude oil cannot substitute for diesel or aviation fuel without suitable processing capacity,” reads the document.
Aviation, shipping, agriculture, defence and emergency services will continue to require liquid fuels, making domestic refining capacity a strategic concern, the three governments argue.
While welcoming the Commission’s plans to assess refinery capacity, they want concrete measures to keep the industry competitive and protect it against future supply disruptions.
Source: www.euronews.com
