Industrial electricity in Europe costs double what it does in America, and 20 percent more than what Chinese businesses pay. This latest alarming bit of news out of the European Commission understandably has many on the Continent worried about European industry’s ability to compete. In a pointed editorial, the FT writes:
This gap creates a problem for the EU as it tries to attract – and retain – investors who are big energy users. Last weekend Paolo Scaroni, chief executive of Italian oil and gas company Eni, warned that the energy price differential was creating a “massive competitive advantage for the US” and a “real emergency for Europe”. Lakshmi Mittal, chairman and CEO of ArcelorMittal, declared on Tuesday that lower prices would encourage energy-intensive industries to shift to the US. “If we paid US prices at our EU facilities,” he wrote in the FT, “our costs would drop by more than $1bn a year”.
The FT identifies two culprits responsible for higher prices: supply problems and overregulation. With the continent’s domestic reserves of conventional oil and gas on the wane, it’s becoming increasingly reliant on foreign sources of hydrocarbons. Meanwhile, across the Atlantic, the American supply picture is getting decidedly rosier as fracking yields record-breaking quantities of shale gas and millions of barrels of tight oil. Combine that with Europe’s push to increase renewables’ market share (which is only possible through expensive government subsidies), and it’s no wonder that prices are higher.Brussels is waking up to the mess it has made. Rising prices are a big reason why the European Commission is retreating from its renewable energy targets.