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Middle East conflict drives Europe to incur nearly $600 million in additional daily costs, prompting the EU to propose releasing emergency stock to address energy shortages. "In less than five years, Europeans will pay again for dependence on imported fossil fuels," the European Commission wrote in a statement dated April 22. The agency said the EU has spent an additional €24 billion ($28 billion), equivalent to more than $587 million per day, to import energy since the fighting began. To safeguard the economy as energy prices surge, the EC proposed creating a joint agency to rapidly identify the risks of aviation fuel shortages and diesel shortages. They would also coordinate sharing of fuel or releasing emergency stock among member states. The proposals illustrate the economic damage that the Iran conflict is inflicting on Europe. The region had only recently escaped the energy crisis from the Russia-Ukraine war in 2022. A gas station in Berlin, Germany on March 3. Photo: Reuters The International Energy Agency (IEA) and the ACI Europe aviation association had warned Europe could face a fuel shortage in the coming weeks. The EU currently imports about 70% of its aviation fuel supply. Olivier Jankovec, CEO of ACI Europe, said EU countries should also "emergency suspend" certain aviation taxes to ease price pressures. Other measures include income support, energy vouchers, and electricity tax reductions. The sector warns that reduced air travel will "cause significant harm to Europe’s economy," especially for countries reliant on tourism. The drop in oil and gas supply due to the Iran conflict is hitting Asia hardest but is spreading to the West. Even if peace talks help end the conflict this week, Europe’s economy will still suffer as energy supply disruption continues. "Households and businesses are increasingly strained, from higher fuel and food costs to fewer and more expensive flights," the EC said. Lufthansa (Germany) said it would cut 20,000 flights through October to conserve aviation fuel. "Fuel prices have doubled since the Iran conflict erupted," they said. Some sectors are particularly hard hit. For example, many European fishermen have stopped going to sea as profits are squeezed by higher energy and material costs, the EC said. Last week the European Commission activated the "crisis mechanism" allowing member states to directly support fishermen and seafood traders. Businesses and households could also be affected as prices for plastics and cleaning products rise sharply. BASF (Germany) has raised prices for many products, from formic acid used in animal feed to household care products. Some increases exceed 30%. The German Chemical Industry Association said the Middle East conflict has dealt a "severe blow" to Germany’s economic recovery prospects this year. The German and European chemical industry will continue to see order shortfalls and plants remain unprofitable. "There is likely to be further production shutdowns and job losses," the association warned. Neil Shearing, chief economist at Capital Economics, said Europe could fall into recession if the Iran conflict lasts through the first half of this year and "energy supply disruptions broaden." In a report released last week, the IMF lowered its growth forecast for euro-area economies to 1.1% for this year, from 1.3%.
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