A Smaller Refining Base Built on a Bet That Demand Would Fall

In two decades, the European Union has seen about a quarter of its refineries close and its processing capacity shrink by roughly 10%. Policymakers assumed the green transition would permanently reduce demand for gasoline and diesel. Two instruments weighed on margins: the emissions trading system, whose cap is falling and whose free allowances are becoming scarcer, and the industrial emissions directive, which imposes costly compliance upgrades.

When Dependence Becomes a Vulnerability

The consequence is greater reliance on imported refined products. EU refineries still supply about 70% of the kerosene and 85% of the diesel consumed in Europe, but exposure to external shocks has increased. European gas has topped €100 per megawatt-hour, its highest level since the invasion of Ukraine in 2022, amid disruptions to LNG flows through the Strait of Hormuz. The shock added more than €100 billion to the continent's import bills. Energy Commissioner Dan Jørgensen calls it a "wake-up call" for the Union.

Defense Enters the Equation

The issue has taken on a strategic dimension. Defense Commissioner Andrius Kubilius notes that fuel supplies determine military mobility. According to NATO readiness models, the Alliance must be able to deploy and resupply 100,000 troops within ten days, creating abrupt demand for tactical fuel. The logic is mechanical: crude imports do not replace refined products if processing capacity is lacking at the moment of a conflict. Under AccelerateEU, regulations will be revised to ease military access to strategic stocks. Kubilius also advocates extending the Central Europe Pipeline System toward the eastern flank.

A Real Pivot, Still Loosely Defined

Poland, Czechia and Slovakia are calling for a refining protection strategy: preventing carbon leakage, access to EU funds for modernization, and accounting for international competition in the ETS. Brussels has launched its first high-level dialogue with the sector and announced a joint roadmap, including biofuels and e-fuels.

The limits are clear. Nothing indicates what share of the €100 billion in extra costs stems from reduced refining. No binding measure or quantified envelope has been announced. Finally, the Commission must reconcile this shift with its climate objectives.

What the facts support is more modest: European refining is no longer merely a line item to be cut but a component of security of supply. The question is whether this will translate into loosened rules or a simple reorientation toward alternative fuels.

This article was written with the assistance of artificial intelligence and verified by our editorial team.