Europe is already being forced to reconsider how it keeps fuel moving through an increasingly volatile world. Now, as the crisis in the Strait of Hormuz exposes the fragility of international energy routes, ExxonMobil is warning that the bloc could be preparing to restrict its own access to oil and gas from next year. 

In an ExxonMobil commentary included in its July 17 energy newsletter, Alice Wells said the timetable attached to the EU’s new methane rules could raise costs for consumers, weaken industrial competitiveness and leave importers struggling to secure compliant supplies. 

The central warning comes from a Wood Mackenzie study commissioned by IOGP Europe and Concawe. It found that up to 43 per cent of the natural gas and 87 per cent of the crude oil imported by the EU in 2024 could fail to meet the regulation’s requirements from 2027 if the legislation is applied in its present form. 

That does not mean those supplies would simply disappear. Rather, importers could be unable to demonstrate that the fuel was produced under monitoring and verification standards accepted by the EU, potentially placing large volumes outside the legally accessible market. 

Under the EU regulation, importers will from January 1, 2027, have to show that oil and gas were produced in countries with methane monitoring, reporting and verification rules equivalent to those inside the bloc. Alternatively, producers must comply with the UN-backed Oil and Gas Methane Partnership’s highest reporting level and independent verification requirements. 

The obligation applies to contracts signed or renewed after August 4, 2024. Further requirements will follow, with methane intensity reporting beginning in August 2028 and limits on the methane intensity of imported fuels applying from August 2030. 

However, ExxonMobil argues that the infrastructure needed to verify compliance will not be ready in time. The company operates two major European refineries and imports supplies from more than 15 countries, only one of which it believes may have the necessary reporting and verification system in place by 2027. 

The uncertainty is already influencing purchasing decisions, as energy companies begin arranging their 2027 supplies. Importers also face potential penalties that could reach 20 per cent of annual turnover, making companies reluctant to sign contracts where compliance cannot be fully demonstrated. 

Wood Mackenzie estimated that the restrictions could push European gas prices to around $19 per million British thermal units, more than double its underlying forecast. It also projected that petrol prices could be 24 per cent higher and diesel prices 16 per cent higher than they would be without the regulation. 

EU refinery activity could fall by around half when supply restrictions are at their most severe later in the decade, according to the study. Europe could consequently become more dependent on imported refined fuels, adding more than $17 billion to its fuel import costs. 

ExxonMobil said the effects would extend beyond motorists and household energy bills. Steelmakers, chemical producers and manufacturers, already struggling with comparatively high European energy prices, could face another increase in production costs. 

The company is calling for a “stop-the-clock” process that would give Brussels time to amend the regulation without abandoning its methane reduction objectives. It also criticised the European Commission’s proposal to deal with the problem through guidance and more flexible penalties, arguing that companies would still be exposed to the legal risk of non-compliance. 

At the same time, ExxonMobil stressed that “it supports efforts to reduce methane emissions.” The company said its US monitoring network uses cameras, sensors, aircraft and satellites across more than 850 sites, with artificial intelligence continuously scanning for leaks. It has also reported methane emissions in Germany since 1998 and says it has reduced them there by more than 95 per cent over the past two decades. 

Industry concerns have gained support from the International Energy Agency. In a recent IEA warning, the organisation estimated that the pool of traded crude legally available to European refiners could narrow by more than 50 per cent. 

Although around 22.5 million barrels per day of global production may satisfy the required standards in 2027, the IEA said much of it may not be available to Europe because of existing trade relationships, price differences and the technical needs of individual refineries. It also noted that no EU country has yet established a body capable of verifying compliance. 

More than half of the bloc’s member states, including Germany, Italy and the Czech Republic, have consequently supported delaying the requirements. The Commission has considered a penalty waiver for certain breaches between 2027 and 2029 but has so far resisted reopening the legislation. 

Environmental groups dispute the scale of the danger. A separate Rystad analysis, commissioned by the Environmental Defense Fund, concluded that gas capable of meeting the highest UN reporting standard could be double EU demand by 2027, while sufficient compliant crude should also be available to European refiners. 

The dispute therefore centres less on whether methane emissions should be reduced than on whether Europe can build a workable global verification system before the rules begin to bite. With importers making their 2027 decisions now and the Strait of Hormuz already testing energy markets, the time available to settle that question is rapidly running out.