The Saudi oil pipeline shutdown is adding pressure to global energy markets after attacks forced the temporary closure of the 1,200-kilometre East-West pipeline, a key route designed to bypass the Strait of Hormuz.
The disruption has raised concerns about further increases in oil and fuel prices, as European governments seek measures to limit the impact on consumers.
Up to 4% of global supply at risk
The pipeline disruption could put up to 4% of global oil supply at risk if it continues, while Saudi crude output had already fallen sharply in August to its lowest level in more than three decades.
Brent crude recently traded above $113 a barrel amid growing concerns over supply.
Market intelligence firm Kpler estimated that the affected pipeline has a capacity of up to 5.5 million barrels per day. Its head of crude oil analysis, Homayoun Falakshashi, said 3.5 to 4 million barrels per day of exports could be at risk, while around 1.5 million barrels per day supply western Saudi refineries.
Saudi authorities have said repairs to the damaged pipeline have begun, while reports indicate that some loadings from Yanbu may be continuing.
Europe responds to rising fuel costs
French President Emmanuel Macron has ordered a government “mobilisation” over fuel prices and said France is working to secure oil supplies and reduce pressure on motorists.
Italy has announced the abolition of stamp duty on small and medium-powered cars, with Prime Minister Giorgia Meloni presenting the measure as a permanent response aimed particularly at people who rely on cars and motorcycles for daily travel.
Spain has doubled its diesel tax reduction to 20 cents per litre after diesel prices rose sharply in July.
Germany is also preparing measures to ease the impact of higher fuel prices, Chancellor Friedrich Merz said.
EU says there is no supply shortage
The European Commission said the immediate issue is pricing rather than a shortage of diesel or other fuels.
Commission spokesperson Anna-Kaisa Itkonen said EU demand for jet fuel and diesel is currently being met through higher refinery production within the bloc and alternative supplies from global markets.
She added that developments in the Middle East and seasonal demand could further tighten energy markets in the coming months.
The Commission said it is encouraging member states to use taxation measures to cushion the impact of higher prices, while noting that it cannot directly influence global oil prices.
Calls grow for windfall tax
Rising energy prices have also renewed calls for a windfall tax on energy companies.
Socialists and Democrats leader Iratxe García Pérez proposed a windfall tax during the European Parliament’s State of the Union debate, saying the proceeds could support households facing higher electricity, food and fuel costs.
Germany, Spain, Portugal, Italy, Poland and Austria had already asked for an EU-wide windfall-profit mechanism to be discussed at the September meeting of EU finance ministers.
The European Trade Union Confederation has also backed the proposal, with its General Secretary Esther Lynch calling for measures to address the pressure on workers from the prolonged cost-of-living crisis.
Also read: Saudi pipeline shutdown puts oil exports to Europe and Asia at risk
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