Europe's "Less" Is Doing More Than Anyone Gives It Credit For

Brent is sitting a touch above $104 this morning, down slightly from yesterday's surge. The Strait of Hormuz, which used to move something like a fifth of the world's oil and LNG before the war, has been effectively shut since March. Saudi output dropped around 1.9 million barrels a day in August, tanker rates are breaking records, and the EIA doesn't see Middle East production back near pre-conflict levels until the second quarter of 2027.Meanwhile, the European Union imports 57 percent of the energy it consumes and spent €340 billion on fossil fuel imports last year. By every rule of thumb we've leaned on for the last fifty years, Europe is the casualty in this story. The one that gets wrecked.Except it's not getting wrecked…The Commission trimmed its 2026 growth forecast back in May, from 1.5 percent down to 1.1, with a rebound to 1.4 percent penciled in for next year. Unemployment holds around 6 percent across the whole window.Set OilPrice.com as a preferred source in Google here.So the world's single most important energy chokepoint closes, Brent runs up 58 percent year on year, and the bill comes to three tenths of a percentage point.My takeaway here isn't that that's a continent falling apart…it's that it's a continent that’s spent twenty years quietly installing insulation and now it's getting to see whether it works.How a Quiet Twenty Years Pays OffThe EU now runs on roughly 44 percent less energy per euro of output than it did in 1995, and more than a third of that improvement has landed since 2019 alone.Between 1990 and 2024, the bloc grew its economy more than 70 percent while cutting net greenhouse gas emissions 40 percent. It now puts out 184 grams of CO2 equivalent for every euro it generates and accounts for about 5 percent of global emissions. Primary energy consumption fell 9.6 percent in the decade to 2024, and 21 percent in Germany over the same stretch.An economy that produces more while burning less isn't stagnating…it's just getting more efficient, and there's no headline number for that, so it mostly doesn't get written about.Why "Less" Looks Like DeclinePull a gas boiler out of a house, drop in a heat pump, insulate the walls, and the household ends up warmer and spending less. The country imports less gas. Every month for the next twenty years, money that used to leave the continent stays in it.Measured GDP logs all of that as a one-time construction bump followed by a permanent decline in household consumption.Scale it up, and it becomes more pronounced…Paris built something like 1,000 kilometers of cycling infrastructure across two rounds of its Plan Vélo and ripped out a huge share of on-street parking to do it. Cycling is now the second most common way to get around the city, ahead of driving.None of that was sold as energy policy, but it is energy policy, isn't it?Every trip that stops being a car trip is a barrel that stops getting imported, permanently, with no subsidy sitting there waiting to be unwound when the next government turns up.And every one of those trips used to count as economic activity.None of which makes GDP useless. It just means GDP was built to measure an economy that's still putting the thing together, and Europe mostly already put the thing together.What's left is running it better, and running it better shows up in the accounts as less.The Spain-Italy GapIf you want the cleanest version of the argument, it ran in public this year.Gas set the price of electricity in about 15 percent of hours in Spain this year. In Italy it was 89 percent. Spain closed 2025 with renewables covering 55.5 percent of generation, 56.6 counting self-consumption, sitting on more than 80 gigawatts of wind and solar. Italy imports 74.8 percent of its energy and took 52.3 percent of its power from fossil fuels.Then Hormuz shut. Spain grew 0.7 percent in the second quarter and outpaced Germany, France and Italy, with Goldman Sachs calling it structural resilience and noting Spain has posted the best productivity growth of the EU's four biggest economies since 2021. Italy got flagged as the most exposed economy in the eurozone if prices stay up.Same war, same tanker routes, same currency, wildly different outcomes, and the variable is what each of them plugged the grid into ten years ago.Playing by Different RulesHere's my problem with the competitiveness framing… generally, and honestly, it isn't really an economics objection.Europe keeps getting measured against the US and China as though all three are playing the same game, and they aren't. America spends about 17.6 percent of GDP on healthcare, roughly $14,900 a head, and gets a life expectancy of 78.4 years. The EU spends around 10 percent and gets 81.5. That seven-point gap counts as economic activity on one side of the Atlantic and as money Europeans simply never had to hand over on the other. On the scoreboard it's a win for Washington. At the actuarial table it obviously isn't.Run the same exercise through privacy law, environmental compliance, labor protection, carbon pricing, and it's the same story: Europe absorbs costs its competitors push onto somebody else, and then gets graded against them on a metric that treats pushing costs onto somebody else as growth. China's edge is partly scale, and partly that 1.4 billion people don't get much of a vote on the tradeoff.I'm not saying Europe is morally superior here… I'm just saying the comparison does a lot less work than people think it does.On the Bear CaseMario Draghi's competitiveness report is the serious version of the bear case, and it came from the guy who saved the euro rather than from a lil ole columnist like myself, so it deserves better than a hand wave.EU firms pay two to three times what American firms pay for electricity and four to five times for gas. Goldman ran it plant by plant and found a large European car factory can be carrying €500 million a year in excess power costs against a US competitor, a chemical plant closer to €1 billion. The EU-US labor productivity gap has gone from roughly 5 percent in 1995 to something like 25 percent now.All of that is real, and Europe should spend the €800 billion a year he's asking for.But there's a finding buried in the Commission's own files that basically nobody cites...A background study prepared for the 2014 European Competitiveness Report looked at this exact price gap and found that energy cost shares in EU and US firms came out relatively close anyway, because European firms had compensated by getting a lot more efficient with the energy they were buying.Expensive energy didn't only hurt them, it taught them something.And that's the piece the competitiveness crowd keeps skipping past. Draghi measures the gap against American output. The more interesting question is what thirty years of that constraint actually produced, and the answer is the least energy-intensive major economy on the planet, now running a power system where wind and solar beat fossil fuels for the first time on record.What's Actually Going WrongNone of that means the critics are wrong to flag problems. They aren't. But it's worth being specific about which problems are genuinely serious and which are just noise, because they aren't all the same thing.The Commission's own decomposition of the industrial energy drop is blunt about why it happened. Between 2019 and 2023, the reduction came primarily from structural shifts away from energy-intensive sectors, specifically chemicals, basic metals, non-metallic minerals and pulp, and the Commission describes it as a painful contraction of activity.Translated, a chunk of Europe's improved energy efficiency is chemical plants that shut down.German energy-intensive production fell 15.2 percent between February 2022 and March 2026 against 9.5 percent for industry overall, and employment across those sectors dropped by 53,300 jobs. That's not a leaner factory, that's a closed one, and anybody making the optimistic case has to say so out loud instead of hiding behind the aggregate.Some of the emissions story is just savvy bookkeeping too… the EU's consumption footprint ran 21 percent above its production-based emissions in 2023, and roughly a third of that footprint comes from production outside the bloc. Buy the ammonia instead of making it, and the emissions don't disappear… they just stop being yours.The buildout is behind schedule as well. Renewables reached 26.2 percent of gross final energy consumption in 2025 against a 42.5 percent target for 2030, which now needs 3.3 points a year, roughly three times the pace hit last year. Circularity got to 12.2 percent in 2024, a record, and the target is around 24 percent by 2030, so that one isn't happening either.This summer exposed the flexibility gap in a way no white paper ever could. Heatwaves pushed daily power demand up 28 percent in Italy and 23 percent in Hungary. EU hydro hit its lowest May, June and July in at least a decade. Up to 43 percent of French nuclear capacity was offline on July 12. Hungarian prices cleared €900/MWh on June 30. Solar carried the daylight hours and then the evenings broke, because Europe built the generation and skipped the storage.Defense is the other bill arriving. Member state spending went from €218 billion in 2021 to something like €381 billion in 2025, Germany alone is projecting €162 billion by 2029, and NATO's long-run target sits at 5 percent of GDP. That money competes directly with grids, retrofits and batteries for the same fiscal space.Trading One Dependency for AnotherHere's what should worry Brussels a lot more than the growth rate.Russian gas fell from 45 percent of EU imports in 2021 to about 12 percent by 2025, which is a genuine achievement and got done faster than almost anyone predicted. But the replacement was American.The US supplied 58 percent of Europe's LNG in 2025 and 63 percent in the first quarter of this year, with IEEFA expecting two-thirds across 2026 and as much as 80 percent by 2028 or 2029. Under last July's trade deal the EU committed to buying $750 billion of American energy by 2028 while accepting a 15 percent US tariff on most of what it sells back.There's exactly one way out of that trap that doesn't involve going and finding a third landlord, and it runs through the demand curve.IEEFA reckons EU LNG demand could fall around 23 percent by 2030 if efficiency, renewables and heat pumps hit their marks. Heat pump sales across 16 European markets rose 10.3 percent in 2025 to about 2.62 million units, the first decent year since 2022, and the thing that actually moved the needle was governments cutting electricity taxes rather than writing bigger subsidy checks.Every one of those swaps subtracts from measured economic activity. Imported gas is GDP. A heat pump running on domestic solar mostly isn't, once it's bolted to the wall.Brussels has at least named the problem directly. The April AccelerateEU package was built around a single admission: that the EU had spent around €50 billion extra on fossil fuels since Hormuz closed without receiving, in the Commission's own words, a single extra molecule of energy for it. The response on paper is specific: a commitment to push electrification from 21.3 percent of final energy consumption today to 32 percent by 2030, a target to scale battery storage to roughly four times current capacity, and an Electrification Action Plan published in July aimed at unplugging the permitting and grid bottlenecks that have slowed all of this down. Whether those timelines hold given the defense competition for fiscal space is a fair question. But the direction is set, and it's pointed away from gas.The demand answer, in other words, is heat pumps and electrification. The production answer, what actually fills the industrial hole when the chemicals plant that closed doesn't reopen, is a different question, and not one Brussels has answered cleanly. But there's a model sitting in plain view.The Emilia-Romagna ModelEmilia-Romagna came out of the Second World War as one of Italy's poorest industrial regions and is now among the wealthiest in the EU, third in Italy by GDP per capita, with inequality below the national average.It got there on roughly 15,000 cooperatives employing close to half a million people.Estimates of their share of regional output run anywhere from 7 or 8 percent of private GDP excluding banking and insurance up to 30 percent or more depending on what you count, but the direction isn't in dispute.A cooperative doesn't need to hyperscale to keep a capital market happy, and it can't relocate to the Gulf Coast, because the owners live in Modena. It can grow at whatever speed the local economy actually needs, cover local demand, and still have enough left over to export. When a multinational walks over power prices, that's a hole. When a co-op fills it, the production stays put.And this isn't fringe in European energy either.Danish wind started out as farmer-owned co-ops. German Energiegenossenschaften built a real chunk of the early renewables fleet. Italy's Marcora Law lets workers buy out a failing firm using their own unemployment benefits as the startup capital, which has no American equivalent at all.The Clean Energy Package then wrote the model straight into EU law, with renewable energy communities under Article 22 of the Renewable Energy Directive and citizen energy communities under Article 16 of the Electricity Market Directive. There are more than 8,000 energy communities active across Europe now.Then again, the European Court of Auditors put out a report this year called Energy communities: Potential yet to be fulfilled, and the title is the finding. Definitions are a mess across member states, transposition is incomplete, the expected contribution to renewable generation got badly overestimated, and communities still wait far too long to connect to the grid. So it's a delivery problem rather than a design problem.Governments love saying they support entrepreneurship. Supporting cooperative entrepreneurship would do more for more people, and the legal scaffolding is already sitting there.So Where Does That Leave us?Europe is going to grow slowly. 1.1 percent this year, maybe 1.4 next, probably something in that neighborhood for a long while. The Commission isn't hiding it… the OECD is gloomier still, and nobody in Brussels has a credible plan to make the number look American. And it shouldn't, really..That number is measuring a continent that cut emissions 40 percent over 34 years while growing more than 70, that runs on 44 percent less energy per euro than it did in 1995, that now generates more electricity from wind and sun than from fossil fuels, and that just ate the closure of the world's most important energy chokepoint for three tenths of a point.Roughly €50 billion in extra fossil fuel spending has left the bloc since March, and as the Commission put it, without receiving a single extra molecule of energy for it. Every increment Europe knocks off that 57 percent import share is a subtraction from GDP and an addition to sovereignty, and the accounting system all of us use has no column for the second one.By Michael Kern for Oilprice.com More Top Reads From Oilprice.comHormuz Shipping Traffic Plunges as Middle East War EscalatesChina's Crude Imports Set to Hold at 7.2 Million Bpd in SeptemberEnergy Aspects: Oil Market Has Reached an "Inflection Point"