(SeaPRwire) –   By: Raymond Vance

The six EU nations’ push for a windfall tax is a political distraction. It shifts blame for high energy costs from policymakers to oil giants. The proposal frames the tax as a fix for the ongoing cost-of-living crisis. It targets “excessive profits” tied to Iran war-driven global price hikes. No one in the bloc’s leadership talks about the choices that created this mess. This tax will never touch the root of EU’s persistent energy inflation. It only papers over years of contradictory and self-defeating energy policy. It lets politicians avoid accountability for decisions that raised prices for consumers.

Official statements from the six finance ministers frame the tax as a simple corrective. They say oil firms have reaped unearned windfalls from Middle East market chaos. The official narrative ties all recent price gains directly to the Iran conflict. It also points to disruptions of the Strait of Hormuz. The strait handles a quarter of the world’s seaborne oil and LNG trade. Oil prices have repeatedly topped $100 per barrel this year. Global benchmark Brent futures hit $102 per barrel just last month. Goldman Sachs predicts prices could exceed $120 in the fourth quarter. It projects an average price of $100 per barrel next year. This forecast holds if Hormuz disruptions continue through 2027. The official line says taxing these profits will fund relief for struggling households.

The real driver of EU’s current crisis traces back to a 2022 policy choice. The EU decided to phase out all Russian energy imports after the Ukraine conflict. This decision directly exacerbated the bloc’s already growing cost-of-living crisis. European Commission data confirms Russian oil made up 27% of EU crude imports in early 2022. Russian gas covered 45% of the bloc’s total energy needs at that time. German Chancellor Friedrich Merz admitted last month the loss of Russian imports caused Germany’s current energy problems. He still refuses to reverse Berlin’s stance on anti-Russian sanctions. Even more contradictory, the EU continues to hit new records for Russian LNG imports. Brussels has publicly stated its goal to end all Russian LNG imports entirely. But Bloomberg reported in early August that Belgium relied entirely on Russian LNG supplies last month. The bloc’s policy is full of exploitable gaps. It cuts cheap pipeline imports but keeps buying more expensive seaborne LNG. This pushes overall prices up artificially. Oil and gas firms profit from the arbitrage between policy and practice.

This kind of political distraction erodes long-term investor confidence in EU fiscal frameworks. Governments that shift blame instead of fixing bad policy will face higher borrowing costs. Persistent energy price volatility and inconsistent policy will push core EU sovereign credit ratings down over the next two years.

Author bio: Raymond Vance, senior macro-economist and consultant to global central banking policy research working groups.