EU to delay methane law, assess refining strategy to combat fuel costs

The European Union hopes to bring down winter fuel costs with a one-year delay to its incoming methane regulation, strategic talks on refining, and a new taskforce to bundle its energy demand, European Commission President Ursula von der Leyen said Oct. 6.

In a live address from Brussels, von der Leyen said the EU would "give flexibility to exporters" for another year on methane, extending a January 2027 deadline for oil, natural gas and coal importers to demonstrate compliance with the bloc's internal monitoring, reporting and verification standards.

With diesel prices now double their pre-war levels, the bloc is also launching a strategic dialogue on European refineries co-chaired by its energy commissioner, Dan Jørgensen, and commissioner for defense, Andrius Kubilius, von der Leyen said, aimed at cutting costs and ensuring supplies for both civilians and military purposes.

"Families and industries are paying the cost of the crisis," she told the European Parliament, estimating that the EU has shouldered an additional €100 billion cost for its imported fossil fuels as a consequence of the Middle East conflict.

Faced with the prospect of intensifying cost pressures into the winter season, the bloc has agreed to additionally launch a new task force to bundle energy demand. The new model would mirror emergency measures implemented in the aftermath of Russia's invasion of Ukraine in 2022, according to von der Leyen, but would go from "simple matchmaking" to a more sophisticated process aggregating demand and delegating joint procurement to market operators, she said.

In the coming months, the commission will additionally be coming forward with its electricity action plan, which aims to cut fossil fuel imports by doubling the share of electricity in its energy mix, the commission president said. Electricity currently makes up 25% of final EU energy use, offering a potential for €260 billion in annual savings if the target is met, according to commission estimates.

Von der Leyen praised a recent G7 decision to release 100 million barrels of diesel and crude oil from its members' strategic reserves, announced on Oct. 2, which set a four-month deadline for new supplies to reach the market. "This will help stabilize the global crisis," she said, without providing further detail on the contribution of the group's European members.

Responding to the announcement in Brussels, MEP Christian Ehler offered support for the methane delay, but called a one-year suspension "unrealistic" and argued that the EU should go further.

"We need a three-year postponement of import requirements, until 2030, to give businesses legal certainty to secure stable energy supplies," Ehler said.

Warning on state support

On an EU level, the bloc plans to prolong its "AccelerateEU" initiative, a temporary state aid framework aimed at supporting the region's industrial sectors through the crisis, although national support schemes should remain temporary and targeted, von der Leyen warned.

"There should be no blanket handouts, as that would only increase the demand," von der Leyen said, praising energy voucher schemes in France and Romania as examples of good policies that have specifically targeted low-income families.

Her comments come as several EU member states have decided to extend temporary fuel tax cuts, while other countries, such as Poland, have opted to impose windfall taxes on fuel companies to respond to soaring prices. From a pure supply perspective, EU officials maintain that the region does not currently face any energy shortages, although representatives have amplified warnings of a "tough winter" ahead due to elevated prices.

ICE low sulfur gasoil futures markets have cooled since G7 members agreed to avoid energy export bans in a statement Oct. 2, helping to allay fears of potential US restrictions. Physical prices have also come off from all-time highs but remain elevated. Platts, part of S&P Global Energy, assessed CIF Northwest European ULSD cargoes at $1,398/mt on Oct. 5, down from a high of $1,642/mt on Sept. 15.