Caspian Report - Issue: 08 - Fall 2014

The large discrepancies in energy prices
can be attributed to lack of contribution in
the markets. Therefore, it can be expected
that energy prices will converge across the
EU countries as these markets integrate and
become more liberal.
ABSTRACT
In this note we provide a brief overview
of energy markets in the EU
countries. In particular, we focus on
energy consumption dynamics and
energy prices in the EU countries.
Since prices of oil and oil products
are determined by international
markets, we pay special attention
to gas and electricity markets. The
large discrepancies in energy prices
can be attributed to lack of contribution
in the markets. Therefore, it can
be expected that energy prices will
converge across the EU countries as
these markets integrate and become
more liberal.
1. INTRODUCTION
Energy drives modern economies
and is a key component of economic
development. Therefore, energy
markets have usually been a central
interest for national policy makers.
The emphasis on environmental objectives
has characterised EU energy
policies in recent years. In particular,
the European climate and energy
package enacted in 2009 sets ambitious
climate and energy targets for
2020. These targets, known as the
“20-20-20” targets, set three key objectives
for 2020: a 20% reduction
in greenhouse gas (GHG) emissions
from 1990 levels; raising the share of
renewable energy sources in total energy
consumption to 20%; and 20%
improvement in energy efficiency.
The discussion also raised some other
concerns, such as safety, reliability
and overall security of energy supply
(Eurostat, 2009). As Günther Oettinger,
European Commissioner responsible
for Energy pointed out, “...What
is at stake is our ability to reach the
goals set in the Europe 2020 Strategy
through a secure, competitive
and sustainable supply of energy to
our economy and our society.” (Communication
from the Commission -
IP/10/264, 2010)
Energy security is usually defined as
the availability of energy to users at
affordable prices. In order to ensure
energy security, the European Parliament
and the Council of the European
Union has enacted the Third Energy
Package in 2009. The Third Energy
Package is a set of policy instruments
1 for the creation of an EU-wide
internal energy market. This aims to
achieve efficiency gains and competitive
prices through further liberalisation
and integration of the domestic
markets of member countries.
Supply conditions and the level of
market competition are one of the
most important determinants of the
price of any commodity. Energy markets
have historically been highly
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CASPIAN REPORT, FALL 2014
1.
Third Energy Package, that consists of two directives (Directives 2009/72/EC and 2009/73/EC) and three regulations
(Regulations No 713/2009, No 714/2009, and No 715/2009).